Budgeting Starts With Separating

What’s in a Budget? Part 2

I don’t know about you, but talking about money can be exhausting, especially when you’re having financial issues.  In this post, we are going to share step one to budgeting which is to separate your income and know where the money is going.  

We like to  separate our money by specific categories.  We start with the categories that have the potential to upset our budget and household the most.  Before we get into that, let me give you this caveat.  

Pamela and I decided that the best way to reach our financial goals was by putting all the money together.  We don’t believe in having separate accounts and separating the bills by hers and mine.  Instead, we separate by categories.  We’re not suggesting that you should following our techniques, but get ideas from ours and create the one that best works for your particular situation.  By putting our efforts together, we can run our home, our business without having to point fingers at who pays or didn’t pay what.  We do this together.

Here are the categories for our budget that have emerged over the years as we’ve worked to improve our financial status.  Keep in mind that the order isn’t as important as establishing categories and setting aside the funds to cover each category.

1. Mortgage Payment.  The mortgage could be the biggest source of financial issues if you spend it on other things.  Have you ever gotten a month behind on your mortgage or rent?  Being behind brings a level of stress and anxiety that’s not worth having.  After going through this scenario on various occasions, Pamela and I wrote into our Family Plan that we never want to be in this place ever again.  So as a result of planning, we setup an account that holds nothing but our mortgage payment.  We direct-deposit and when it’s time to write the check, we never have to worry whether the funds are available.   We forget this part of our income exists.  It’s almost like we don’t have a house payment as we never have the funds in hand.  Also, there’s never a risk that we spend our house payment funds.
2. Auto Loans.  Because auto loans are usually the second largest payments a person could have and after implementing our mortgage account, we decided to do the same for our auto payments.  We never allow these funds in our hand.  This way we never spend our auto payment and we finally stopped the cycle of getting behind on these payments as well.
3. Support and Dependent Care.  If you haven’t figured it out yet life isn’t simple and neither are your finances.  Because we have a blended family, we have child support payments and other planned dependent care payments to consider.   At first we struggled with this not only financially, but mentally.  It wasn’t until we applied the principle of separating our income did we begin to master this category as well.  We have an account for that too.  You could possibly be thinking that we have a lot of accounts; we do, but the trade-off is worth it.  It has brought peace to chaos.
4. Bills and Household Spending.  I know you were probably wondering when will we get to bills and other expenses.  Again, there’s a separate account for that.  Your bills, at least ours, are the hardest to track and keep up with.  They vary in amounts and come sporadically throughout the month.  However, having a separate account will ensure that you won’t spend the money that’s designated for your bills.  I like to make certain we only include the mandatory expenses, the things we can’t do without like water and electricity.
5. Personal Spending.  Life can be very disappointing and dull if you work hard everyday and on payday have no funds left for yourself.  This category is very important to helping you feel fulfilled.  You really do need an account for this.  Pamela and I use a wonderful tool called the “Simple Card“.  With this account, we put aside money for our own spending and we get to spend this amount any way we desire.  It’s like having an allowance.  It’s actually a reward for maintaining the discipline of budgeting.
6. Giving.  Last but not least; we have a special account (AMEX Serve) that allows us to have designated funds to give toward others.  We have a goal to be a blessing to others with random acts of kinds. And this one account has changed our lives.  

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Our team has worked very hard putting it together. We designed it to help you and your family move the needle forward in making your life your business. Find out more about the Family plan here.

Now that you’ve seen how we separate each category, you need to know the amounts you need to place in each account.  That’s the next action to take.  I suggest you start with the most important, mortgage, auto, bills and any other household expenses.   

Having accounts and budgeting categories allows us to have and create plans for each category.  We can improve each area each year with a plan that targets each category respectively.  Budgeting as we mentioned in the previous post gives you what you need to make and execute your very own strategy for your life, your business.

Today is Friday!
Now that you have step one to budgeting, you are well on your way to running your life, your home, like your business.  

Question: What are you doing today that can be enhanced by separating your expense categories? Leave a comment below or click here to email me.

Additional Resource:

Reviews.com

“Budget is an important topic we revisit on a regular basis. Like all things in life, financial planning and responsibility is a a work-in-progress: the longer we do it, the better we get at it. We’ve touched on a myriad of quality tools that can be used to enforce and enhance your budgeting, like specialized cards and accounts. You may find it easier to create and maintain a household budget by using applications like Mint and You Need a Budget (YNAB). These options plug into your individual checking accounts, savings accounts, and credit cards to track your finances as a whole. In turn, there is no longer the possibility of turning a blind eye to one of your spending accounts, even if it’s only used to pay a singular recurring subscription — these expenses add up. For more information about personal finance apps and how they’re used to create “buckets” for different household expenses, you may find this guide helpful: https://www.reviews.com/personal-finance-software/.”