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 recently paid 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:
March 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 crazy amounts of money coming in from unusual sources: we sold our 2005 minivan, tax returns came in (with an extra $6900 for the clean vehicle rebate), another stimulus check arrived, AND an extra $3500 from California for a clean vehicle arrived.
Overall, that came to OVER $31,000 in extra income!!! Ridiculous!
Quick Look
Here’s a quick snapshot of March:
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: 3%
Mortgage-Primary Residence: 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: We did some lawn work and changed the reverse-osmosis filters.
Percent of Budget: 1%
Gas/Electric: 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: The bill comes every other month.
Internet: Nothing much to say. No cable, no phone. Just the internet. That’s about as low as it comes around here.
YouTube Music: A truly frivolous expense, but we enjoy it.
Red Pocket Mobile: This is our kids’ phone (yes, they share!). We switched over to Red Pocket from Republic Wireless a while ago since Red Pocket works in Alaska.
Cell Phone: 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: Audible had a deal for half off the monthly fee. We love audio books.
Percent of Budget: 2%
Fuel: We took a trip to a national park, so our fuel is a lot higher this month. I also drive some of my kids out to a school 16 miles from our house. That’s 64 miles every school day.
Car Insurance This has gone up with the new cars. 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: Since our cars are new, we shouldn’t have to smog them for the next four years. But, registration is not cheap.
Car Maintenance: We bought some tint for the Clarity, and custom floor mats for the Pacifica.
Percent of Budget: 3%
Groceries: We try to stay around $600, so we are right on budget.
Household: Cleaning supplies, car seat covers, diapers and wipes, and a bunch of other miscellaneous things.
Clothing: Everyone keeps growing! We did buy a suit on sale for our oldest. It was under $50, so we couldn’t pass it up. Otherwise, it’s just normal stuff getting ready for summer weather.
Electronic Replacement (Goal $50) We got some headphones for the little ones and chargers for the electronics on our road trip.
Percent of Budget: 2%
Life Insurance: This is a policy for my husband as he is our only source of income.
Medical: More dental work.
Percent of Budget: 4%
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. This month we also contributed $200 to another cause we felt strongly about.
Christmas: 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: We bought a few gifts.
Gifts: 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: 72% (great!)
Mortgage-Rental Property: We have been paying this down aggressively for just over one year. Now, I am officially calling it PAID! Okay, I left about $4 on it so that we would still have an auto payment next month. If I wanted to pay it off entirely they wanted me to wire the funds. I’m not paying a wire fee! Forget it! So, they will steal another payment from me and have to send it back after paying recording fees and such. We are sooooo happy to have this payment GONE!!!!
Student Loan: 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: This loan is at 1.99%, so we will make the minimum payments on this and prioritize other debt.
Car Loan-Pacifica: LONG story here. The dealership gave us a laughable 5.8% on this loan. There was an extra $750 rebate for financing through Chrysler. And then the not-so-honorable dealership wanted to give us a high interest rate and pocket an extra $250 for giving us a subprime rate (we have over 800 credit scores). We said no thanks, we will take the extra $250 or lower the interest rate. We knew we could pay it down/off in a few months so the rebate made the high interest rate worth it. Anything extra will go to getting this paid off. We used stimulus and tax returns to pay this down. We also took about $7,000 from our brokerage account.
Percent of Budget: 7%
Retirement Accounts: 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. We sold about $7,000 of stock to pay down the Pacifica loan.
Percent of Budget: 5%
Kids Activities: We got a passport for our oldest, paid for driver’s education, and sent some Easter supplies to the kids’ school.
Health Incentive: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…
Dates: 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. We are hoping to take a trip at some point too. Let me leave you with this thought: When in doubt, remember dating your spouse is cheaper than divorce…
Family Fun: We bought airline tickets to Alaska for a summer vacation, went to a national park for a few days and got DVD players for the road trip.
Percent of Budget: 1%
Rental: 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 are in the process of putting on a new roof. Then we will do a new swamp cooler and put some insulation in the attic.
Education: We purchased a supplemental program for one of our kid’s classes.
Unusual and Unexpected: 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 extra minivan on Craigslist and $8 on Offerup. We also paid for our Sam’s club membership.
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.
How Did We Do?
Although I would like to say our top priority is to reduce our debt, we decided that taking advantage of all the clean vehicle incentives and rebates to replace our older vehicles was a good idea.
One car was getting expensive to maintain (2005 with over 165,000 miles). The other, although reliable, also started requiring maintenance like new spark plugs and replacing aging sensors. It had about 112,000 miles on it. Interest rates were low, and we didn’t know how long all these incentives would last. Ultimately, it cost us UNDER 10k to purchase our Honda Clarity and under 20k to purchase a new Chrysler Pacifica Hybrid. Yes, we will have higher insurance and registration costs, but those should be offset by the lower fuel and maintenance costs. We also expect to keep them for about 10 years. We should be set in the car department until we are getting close to retirement! Yikes! That puts things into perspective!
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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