First, Some Background
Mr. C recently finished up his third (and final!) master’s degree. He also switched jobs that resulted in a pay increase. Between a pay increase and no longer needing to pay for tuition, we suddenly (and for the first time in our marriage) had more money coming in than what we were used to living on.
Previously, we didn’t have a lot of money. Therefore, we didn’t spend. Fortunately, we did start to max out our Roth IRAs before Mr. C was out of school.
While that worked alright for our family for a while, we decided we wanted to be more proactive and deliberate with our money.
Mr. C started contributing to his employer-offered 403(b) as we continued to max out our Roth IRAs.
We also prioritized paying off the mortgage on our rental property.
And…we wanted some FUN money too! (Over 15 years on a student’s budget with five kids was long enough!)
To make this all happen, we decided we needed to FINALLY get on a strict, written budget.
Begining in 2020 we started using a budgeting program called You Need a Budget. It is basically an electronic envelope system.
At the beginning of the month, we use our take-home pay from last month and divide the money between all our “envelopes.” That is the number you see under “budgeted.”
Then, every week, as our credit card and checking accounts record transactions, we take the money out of our “envelopes.” That’s the amount you see under “spent.”
The “balance” is the amount of money that is leftover at the end of the month. We keep the money where it is and add it to our “envelope” for the next month for most categories.
With that intro, let’s look at the numbers:
February Financial Roundup
Because of the variable nature of our income, we live off of last month’s income.
My husband works in higher education, therefore he only gets paid in the summer if he teaches summer classes. Summer work is never guaranteed and is not enough to cover our summer expenses, so we always save throughout the year to have money to pay the bills come summer.
This month, we took all of Mr. C’s overload pay (he’s currently teaching extra classes) and transferred it to our summer fund. We then budgeted what was leftover.
We also had just over $2800 in rebates come in for our clean car purchase that padded our “other” income.
Quick Look
Here’s a quick snapshot of February:
With that said, let’s dig into the categories:
Rental income is net income after we pay taxes and insurance. (Principle and interest on the loan are in “debt payments.”)
Percent of Budget: 8%
Mortgage-Primary Residence (Goal $819): It’s depressing how slow a 30-year loan gets paid down. This includes PITI. We have lived here since early 2013. We were lucky enough to purchase near the bottom of the real estate market in our area with a great interest rate of 3.125%.
Home Maintenance (Goal $200): Our garage got a good makeover this month. Overhead shelving and extra shelving for the walls helped up organize and gave us tons of room around the car. We also purchase a dwarf mandarin tree.
Percent of Budget: 2%
Gas/Electric (Goal $50): Our utilities are usually low thanks to solar panels that are completely paid for (and my dad, who designed and installed them)! Our gas usage goes much higher in the winter, and our solar true-up (when we might get a bill for extra electricity we used throughout the year) is in January.
Water (Goal $50): The bill comes every other month.
Internet (Goal $75): Nothing much to say. No cable, no phone. Just the internet. That’s about as low as it comes around here.
YouTube Music (Goal $15): A truly frivolous expense, but we enjoy it.
Red Pocket Mobile (Goal $10): This is our kids’ phone (yes, they share!). We switched over to Red Pocket from Republic Wireless before the boys headed to Alaska for an extended trip with the grandparents. We had Republic for years, and it saved us a TON of money. But Red Pocket works off of AT&T’s network, which is the only carrier with service in the parts of Alaska they visited.
Cell Phone (Goal $35): This is a sinking fund for Mr. and Mrs. C. I have been with Mint Mobile for over two years now and love it. Mr. C recently switched over to red pocket. They are both great plans with Red Pocket having the advantage of working in Alaska. We are on the yearly plan for both, so by putting aside $35 each month, we have the yearly bill covered when our plans are up. Mr. C’s bill was due this month and we were about $4 short.
Technology Subscriptions (Goal $10): We had to pay for H&R Block for taxes.
Percent of Budget: 2%
Fuel (Goal $100) Our previous goal before plug-in electric vehicles was $350. Our kids are set to return to school next month, so we will be back to driving a lot. A few of the kids are in a school about 16 miles from our house which translates into 64 miles a day! Those should be all-electric miles. Right now the only time we use gas is when we make a longer trip for doctors or shopping once or twice a week.
Car Insurance (Goal $140) This has gone up with the new car. We got a low rate from Geico straight out of college several years ago and have never found a better rate no matter how many quotes we get from other places.
Car Registration, Smog (Goal $70) We live in California, so every other year cars have to be smogged. Thankfully, neither of our older vans has had any trouble. Keeping our fingers crossed that it stays that way!
Car Maintenance (Goal $100) Since we are getting new cars and getting rid of old cars we can hopefully keep this category low for a while.
Percent of Budget: 10%
Groceries (Goal $600) Hmmm. We were a little over this month.
Household (Goal $400) Wow. Once again we were big spenders. There weren’t any big expenses. I did buy curtains for the living room which came in just over $50. Other than that, it was normal household stuff–soaps, tp, diapers and wipes.
Clothing (Goal $100) The kids are growing and every one of them needs some new clothes in the wardrobe before they go back to school. This will be expensive again next month.
Electronic Replacement (Goal $50) Our computers and tv’s are all still working!
Percent of Budget: 0%
Life Insurance (Goal $34) This is a policy for my husband as he is our only source of income.
Medical (Goal $0) Last month we really depleted this balance with some dental work and more was needed. Next month we will probably need to pay more. Sigh. We also contribute $800 in pretax dollars to a Flexible Spending Account (FSA) to pay for copays, deductibles, prescriptions, eyeglasses, etc. We don’t include the $800 in the budget since it is taken out of my husband’s paycheck, and we never see it.
Percent of Budget: 20%
Charity We tithe based on our income, so this fluctuates greatly. We also give $100 every month to help those in our community who are less fortunate.
Christmas (Goal $150) Having a sinking fund for Christmas is awesome. I have to say, it’s a stress-free way to shop for the holidays. No guilt, no wondering if we are over-spending. We know how much we have to spend and that is that. For reference, we generally spend $100 for the older kids, $50-75 for the younger kids, $75 for parents/in-laws, and the rest for family gifts or my husband and me.
Birthdays (Goal $65) We had a couple birthdays this month.
Gifts (Goal $45) This is where we keep the money for gifts for mother’s day, father’s day, parents’ birthdays, and the occasional wedding or baby shower and teacher gifts. Nothing exciting happened, so no spending.
Percent of Budget: 32% (great!)
Mortgage-Rental Property (Goal $1314) We used some rebates from our clean vehicle purchase to add an extra $2000 to the principle. We turned our primary residence into an investment property in early 2013 when we bought a larger home. The interest rate is at 4.125%. We usually take $1,050 each month and put it toward the principal then pay the minimum payment (principal and interest) and any expenses out of our regular budget. This balance was sitting above $40,000 at the beginning of 2020! This should be GONE soon.
Student Loan (Goal $107) After two bachelor’s degrees and four master’s between us, we only have this loan from my husband’s undergrad days. He has some desire to get rid of it, but I never want to pay it off early! The interest rate is sitting at a below-inflation rate of 0.625%. I’ve always been able to convince him that another expense was more pressing. Hehehe. Right now, we have the rental mortgage, so he is willing to focus on that instead.
Car Loan-Clarity (Goal $409) This loan is at 1.99%, so we will make the minimum payments on this and prioritize other debt.
Percent of Budget: 22%
Retirement Accounts (Goal $2,650) We max out our Roth IRAs every year. Mr. C also contributes to a 403(b) (it’s like a 401(k), but for government workers) with pretax dollars through work. We recently increased his contribution to $1,650 for each regular paycheck (he gets ten throughout the school year).
(Mr. C also has about 10% of his gross pay taken out for a pension plan. We don’t see the pension money and have no control over it, so we don’t put it in the budget.)
Emergency Savings (Goal $0) This just sits in a savings account attached to our checking account.
Brokerage Account (Goal $0) Several years ago, I got sick of watching our savings earn less than 1% interest, so we took a big chunk and invested it in some utilities that regularly pay 4% dividends. We left it there, and it’s been growing steadily ever since.
Percent of Budget: 2%
Kids Activities (Goal $50) We recently dropped how much we put in here. The kids aren’t doing any sports, thanks to COVID. We would all prefer there were sports to pay for! But we did spend money to get fishing supplies. Our son even caught a super yummy fish for us to eat!
Health Incentive (Goal varies) This is where my husband and I pay ourselves to meet health goals, such as exercising or eating healthy. A little bit strange, but it works for us. After years and years in school, this totally frivolous category was created! We spend it on whatever we want. Excuse me; I need to hop on that elliptical… This month we also put the leftover Christmas funds in here so Mr. C can think about what he wants for Christmas last year!
Dates (Goal $100) We usually go out once a week without kids to see if we still know each other! COVID is helping us save money by doing drive-thru and take-out only. This balance has gotten pretty high, so it’s on pause for a while. Let me leave you with this thought: When in doubt, remember dating your spouse is cheaper than divorce…
Family Fun (Goal $100) We purchased a few suitcases in anticipation of our trip to Alaska this summer!
Percent of Budget: 0%
Rental (Goal varies) We decided we needed to put aside some money for any repairs our rental might need. Previously we paid for them as they came about-probably not the best strategy. We know it will need a new swamp cooler shortly along with a new roof. We already have shingles bought and stored for the spring.
Education (Goal $50) We purchased a supplemental program for one of our kid’s classes.
Unusual and Unexpected (Goal $50) When we started budgeting, it seemed like we constantly forgot things. We are getting a lot better, but we keep this line item for crazy things we didn’t anticipate. We spent $5 to list our older minivan on craigslist.
Work-Related (Goal $0) I think we have finally got Mr. C set up for working from home. When he goes back to work this will be used for his weekly lunches with colleagues.
Percent of Budget: 0%
Blog (Goal $0) I finally decided to have a hobby besides being a mommy! I funded my blog with the payout from TopCashBack.com. I don’t have plans to spend anything in the near future.
How Did We Do?
Although I would like to say our top priority is to reduce our debt, the truth is we have decided that taking advantage of all the clean vehicle incentives and rebates to replace our older vehicle would be a good idea. One car is getting to be expensive to maintain and while the other is reliable it does have about 112,000 miles on it. Interest rates are low, and we don’t know how long all these incentives will last. Ultimately, it cost us UNDER 10k to purchase our Honda Clarity and should cost under 20k to purchase a new Chrysler Pacifica Hybrid. Yes, we will have higher insurance and registration costs, but those should be more than offset by the lower fuel and maintenance costs.
We are steadily investing for our retirement. We are on schedule to contribute a total of $28,500 to retirement funds and then another $14,000 to pensions for 2021.
Our donations to charity are another big category, but that is a deliberate choice for us.
Our goal with money is not to save as much as possible. Instead, we try to use our money in ways that will enrich our lives.
I feel like we are on the right track, but am always open to suggestions!
So, frugal friends, where can I do better?
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