Getting Started

Before creating a monthly budget, I used the free annual spreadsheet to plan out my year. Seeing everything all on one page is super helpful in analyzing how my cashflow changes throughout the year. Doing this helps me be proactive instead of reactive towards irregular expenses that I know are on the way.

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Fixed Expenses

This was the category that gave me the most anxiety due to the exorbitant cost of living in the bay area. Since I do not have any family or friends here, living alone was my only option (I refuse to live with strangers or somewhere unsafe, sorry not sorry). Other than my rent costs, everything else is pretty normal for me.

I currently only pay half of my Geico and Tmobile. Webpass (internet) was paid in full when I had it activated at a cost of $504 or $42 a month/12 months.

Like I mentioned in my previous blog, I did receive two months’ free rent as well as $1k off of the third month which helped me tremendously during my transition to the bay. My effective rent will be about ~$2300 for the duration of my lease, which is a big reason why I decided on my place.

However, I’ll begin paying full rent in April 2019 so the budget below reflects that change. I’m still waiting on my water/trash bill so it will stay at $0 for now. I have no clue why it’s taking them so long!

Variable Expenses

To figure out my spending amounts, I simply divided most of my previous joint costs in half. If you’re looking for more ideas on how to determine your budget percentages, go here.

This category can differ from month to month based on my needs and spending requirements. I tend to also track travel and unplanned expenses in this category as well just for simplicity purposes. I don’t budget a specific amount for the last 4 expenses unless I have something coming up.

• Groceries = food and drink
• Home expenses = house crap (toilet paper, cleaning supplies, etc)
• Spending = fun money (eating out, entertainment, shopping, etc).
• Laser = laser hair removal (legs), used Groupon for other areas
• Giving = I keep private
• Fastrak = tolls

Savings

To be honest with y’all, these are just estimates. I’ve been hoarding money the past few months in checking accounts but I do plan on sending a majority of those funds to my emergency fund, IRA and sinking pot (general savings).

About my 401k, my employer does offer a match so I will be contributing 6% of my pay after I take care of my emergency fund and other obligations.

Debt

For debt, my house will be put on the market this month and hopefully sold by March/April. There is equity within the home so this will be mostly a positive financial transaction for us. Right now, I plan to use the money to just save and invest (boring yet effective).

Regrettably, I bought an Acura RDX and sunk a lot of cash into that purchase. I will be selling the SUV and buying a smaller car soon. I may or may not use an auto loan for the purchase and I’m still running the numbers and weighing the pros and cons of that decision. Honestly, I just never want to have so much cash tied up ever again because as you can see, life happens.

Tracking Expenses

I track my expenses using Goodbudget (GB) and my monthly budgeting spreadsheet. I also use my AMEX Gold card for all expenses unless I’m forced to use Visa by the merchant. Using my AMEX helps me keep my credit active, gives me rewards and lets me track my spending if I forget to input things in GB.

Here are my variable expenses shown as digital envelopes in the Goodbudget app.

Simplicity is Key

So that is my budget Wealthy Fam! Budgets are not a set it and forget it kind of thing. I’m sure I’ll be tweaking my amounts throughout the year and I’m fine with that.

I’m just thankful that I was financially literate and financially stable enough to enter this new chapter. 5 years ago, I would’ve been dealing with a disaster.

If you need additional help creating a budget and debt payoff plan of your own, check out my free Getting Started – Basics series.

Thanks for reading! I’d love to know which of my expenses are higher of lower than yours <3.

Stay Wealthy Fam,

Dannie

Payment Priority Rankings

We put this list in order of what we think is most important – #1 is most important and the list goes on down to #6.

1. Pay your monthly bills.

You have to take care of your housing and living expenses before directing money to other places. If you are behind on a few bills, getting current should be your top payment priority after ensuring that you have food and shelter.

After living expenses are taken care of, pay your minimum debt payments. Doing so will at least keep you from accumulating late fees in addition to the interest that is already compounding.

2. Set aside $ for weekly expenses.

Weekly expenses can include a variety of things based on your family size, job, and values. These expenses include groceries, home expenses, entertainment, clothing, and other non-billable expenses.

Creating and following a budget will help you figure out how much money you need to set aside. Think of your budget as the spending plan that tells you where your money should go each month.

Read: How to create a budget (series)

3. Put $ into emergency savings.

Having an emergency fund will provide you with a little security when unexpected expenses occur or if there is a job loss or pay delay. Start small and work your way up to 3 – 6 months of expenses in emergency savings.

You just want to be sure that you actually have enough money to cover an emergency if one occurs. Read this article to determine how much money you should have in your emergency fund.

4. Plan for future large expenses.

Many people are thrown off course by irregular expenses that occur every year like car registration, car maintenance, birthdays, holidays and annual health checkups.

By setting aside money every month for known upcoming expenses, you transform from being reactive to proactive. Once the expense comes, you’ll have the money to cover it without needing to rob Peter to pay Paul.

Check out our post on sinking funds to learn how to make a better plan for these irregular expenses.

5. Make extra debt payments.

Once you have everything in your life covered, extra debt payments should be made to reduce the amount of time that you are paying interest and being tied to a creditor.

Like anything new, start small with whatever you can set aside after taking care of your obligations. Then, watch your debt decrease while your net worth and peace increase!

Just make sure you take care of your basic needs first before you think about putting extra money towards debt.

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6. Invest.

Investing may actually come in higher in the rankings depending on your financial situation and stability but I do believe that investing is important and should not be ignored.

• If you are paying off debt, invest up to your employer’s match and throw the rest to debt.
• If you are debt-free or have low to 0% interest debt, you can decide how much you want to invest to achieve your future goals.

Unsure of the requirements to successfully gain your employer’s match? Contact your HR representative or read the employee handbook. Sometimes there are tenure, vesting and other stipulations regarding the matching process.

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At the end of the day, after you get paid, you have a lot of choices to make. I hope this list will help you prioritize your payments if you were having trouble deciding before.

If not, how would you improve this list? What things would you add or rearrange in the rankings? Let us know in the comments below!

$tay Wealthy Fam,
— Dannie

Create a Christmas budget or add a line item for holiday-spending to your normal budget

This holiday season, actually think about how much money you want to spend. Use whatever method makes the most sense for you:

• Decide on a base amount for your total Christmas shopping (i.e. $500 total)
• Set individual spending amounts for each person on your gift list

Whichever method you choose, you need to add that final figure to your budget and track your spending. We don’t make a separate Christmas budget because we usually shop for gifts throughout the year (more on that later).

If you don’t have a budget already, you should create one.

Dannie made these awesome printables to help you figure out your Christmas budget. Make sure you go and download them from our free resource library!

Start saving in advance

Christmas is always on December 25th. Therefore, you can start putting money aside for your Christmas budget at the beginning of the year. The easiest way to accomplish this is by using a sinking fund.

Example: If you plan to spend $500 on gifts and you have 10 months to save, that means you should save $50 each month to have enough money for your holiday spending.

It sounds like a simple suggestion, but it could make all the difference.

Go deal hunting!

If you’ve been around here for long, you know we don’t like to buy things at full price. The same goes for Christmas shopping. Different deals happen all throughout the year but you have to be diligent about seeking them out.

We like to do all of our shopping throughout the year because we typically get better deals before the holiday rush. Plus, we aren’t stuck out in the stores with hoards of people doing their last-minute shopping.

Take advantage of monthly sales or use deal-hunting sites like Ebates or Ibotta. Make sure you’re checking your mailbox for the different coupons that get sent out as well! If you are an impulse spender, you’ll have to be mindful of what your triggers are when it comes to deal alerts via email or apps.

What about layaway?

If you don’t have Christmas gift money yet, you may ask yourself, “Should I put my gifts on layaway?” Depending on your situation, putting things on layaway could be an okay option. If you aren’t charge any interest or extra fees, go for it!

The layaway process works like this:

• Choose an item
• Pay a down payment
• Make monthly payments until the item is paid off.
• The store holds on to the item until it’s paid in full and if you cancel your payments for any reason, they’ll just refund your payments (minus the down payment).

You can read more about layaway on Walmart’s website.

Plan to have a debt-free Christmas

Do not wake up on December 26th with a boatload of debt you can’t pay off! Christmas gifts aren’t worth going into debt over. Your friends and family, should be understanding of your financial situation and not pressure you into spending more than you can afford.

If you’re going to use credit cards, we suggest making a budget first and paying the cards off before the end of the month.

That’s how we normally budget throughout the year and we don’t change that tactic when the holiday comes. Our Christmas budget gets added to our regular budget, so anything that goes onto our credit cards gets paid off before any interest is charged.

If you don’t think you can handle this, you should leave your credit cards at home and only carry cash/debit to the stores when you shop!

Make a list. Check it twice!

Saving money throughout the year and planning your holiday budget will do you no good if you overspend once you actually start Christmas shopping. The easiest way you can avoid this is by making a list beforehand.

Write down all of the holiday related items you plan to buy and then stick to it once you start shopping (the printables help with this). It’s easy to get side-tracked and just start throwing things into your cart. Sticking to a list will help keep you in check!

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Your Christmas budget doesn’t need to be complicated, it just needs to work within your means. Hopefully, this guide will make holiday spending easier for you this year!

Was this post helpful for you? Let us know in the comments below!

$tay Wealthy fam,
— DJ

What is a sinking fund?

A sinking fund is basically a revolving savings fund that has sufficient cash to meet monthly and annual anticipated expense needs.

You establish a sinking fund for one main purpose: To accumulate money for non-monthly or irregular expenses to prevent creating a deficit when those KNOWN or planned expenses occur.

Sinking funds are not meant to cover emergencies such as vehicle or home repairs – that’s what your emergency fund is for.

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Examples of irregular expenses:

• Vehicle tag renewal fees
• Auto insurance bills (if you pay annually, which could save you money)
• Holidays (decorations, gifts, travel)
• Birthdays
• Vacations
• Entertainment (concerts or events)
• Property taxes
• Back to school shopping
• Pet grooming and checkups
• Personal medical payments (co-payments, non-covered expenses, etc)

Sinking funds help take the shock out of many larger expenses as well because you save up for them over time. Once the payment is due, you already have the money squirreled away rather than having to scramble to find money to cover the payment.

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How to set up sinking funds

Here is an example of what sinking funds look like in our budgeting spreadsheet sets:

The budgeting templates in our shop come with a “goal/sinking fund calculator” pre-loaded to help you track your goals in one place. Use code “ptwlove” to get 15% off of your order because we love you!

Where should you keep your sinking funds?

Where you store your sinking funds is largely dependent on how soon you’ll need the money. I think it’s smart to keep your short term funds stored in an account that’s attached to your primary bank. That way, you can easily transfer money as soon as you need it.

For expenses that are 6 – 12 months in the future, we’d recommend putting those funds into a high-yield-savings account. When your money is stored for a longer period of time, you have an opportunity to earn interest while you wait to use it.

We all like free money, right?

Why you may not even need sinking funds

If your income is significantly greater than your expenses, there’s really no reason for you to have sinking funds since you can cover expenses as they come (unless you just don’t want to).

In our case, we don’t need to prepare for every potential irregular expense that pops up. This is due to the fact that we can cover those random expenses from our monthly leftover money, so we created an alternative to sinking funds.

Our alternative to sinking funds

Instead of taking an expense and dividing it by the time we want to save up for it, we have a sinking pot which is set up similar to an emergency fund. Say we budget for $5k in annual miscellaneous expenses. Each month we just send a leftover chunk of change to our sinking pot until it is full.

Benefits of a sinking pot:

• Less complicated because everything is in ONE place.
• You can earn extra money from interest on the total balance of your sinking pot if you keep it in a high-yield savings account.
• You aren’t tracking a bunch of potential expenses.

Why this works for us

Our biggest irregular expenses are concert/event tickets, vacations, and travel to NC. Due to the nature of DJ’s job, we can’t really plan too far in advance so having 1 big pot to take money from helps us do things on a whim.

Having a monthly fun category and monthly house expense category also keeps our budget in check (most of the time).

That’s it! Pick your version and try it, family, you have nothing to lose. Try out a sinking fund or sinking pot – plan, save and have more peace in your budget.

$tay Wealthy fam,
— Dannie