How we Budget

This is the first year that I feel we've been able to be good stewards of the money God entrusts us with. Yes! It took 9 years to finally get here, but, praise God! we are chugging along pretty well. I wanted to take some time to explain how we got here and how much of a blessing its been to us.

Our history is something like this - we'd get paid, tithe, get groceries, pay bills, spend the rest of the money on whatever we want, and then live on pennies until next payday. If an emergency came up, we'd struggle through, or resort to using credit. We had very little savings, if any, and were often in debt (although we has a few years here and there without debt, also). We have never been prepared for things like major car repairs, medical bills, etc. Now, it would be easy to say we were just "trusting in God" for His provision, but when that "trusting" ends up being the use of credit cards, or burdening others time and time again (I do think that family and church should be able to help in severe financial crisis! But not like a loan bank!), its not really trusting, and its not being able to bless others like the Lord would want us to, and its not good stewardship. Its just plain irresponsible.

So... last fall, we were lead to Dave Ramsey, and his Total Money Makeover plan. Michael and I both read his books, were convicted of our bad habits, and determined to do better. When the new year started out, we had almost $8000 in credit card debt. With our tax refund and Michael's annual bonus, we paid that off entirely, and were also able to put aside the beginnings of our emergency fund! We also set up a "0 budget" plan, and carried this out using multiple ING savings accounts. That's the cool part - I'll explain!

First, some might wonder what a "0 budget" plan is. That consists of creating a plan so that every single dollar that comes in during a pay period is accounted for. Some for tithing, savings, various annual expenses, bills, and just plain old spending.

What's an annual expense? Things like car expenses, home repair expenses, membership expenses, homeschooling expenses... anything we might need a bigger chunk of money for, if and when expenses arise. I hope that makes sense! What we did, is decide what our annual expenses are, and then break those down into monthly increments. For example, we buy parking passes to Stone Mountain park for both of our cars every year - this is $70/year. That comes to $5.83/month. We budget out $75/month for Molly's food and vet bills. We pay our own escrow on our mortgage, so we put some aside each month for that. Those types of things are annual expenses.

Once we determined what categories we'd need for budgeting, we opened multiple savings accounts in ING Direct. ING is an online bank that offers interest earning checking and savings accounts, with no account minimums. We have found it so easy to use, and really credit alot of our budgeting success to using this method. Each category has a savings account, and we established monthly automatic transfers into each account from our main checking account. So when we get paid, the money automatically gets put into each category... no worry or hassle on our part. Here is what our ING screen looks like when I open it up:


The beauty of this is that not every category gets spent every month. For example, the homeschool account - I don't need money from it every month, so it just builds up... when one school year has ended and we're about to start another, I have a nice accumulation of money that will cover whatever supplies we need, and its been accruing interest! No more scrambling to try to figure out where the money will come from, no more relying on a credit card!

And, because it comes out in small monthly amounts, we don't even notice it being gone! That is the amazing thing! In the past, it always felt like we never had any money - no spending money (because we were so far in debt most of it went towards that, and the rest we were careless with), and no money for important things like homeschool supplies! We felt like we were always broke! When really, it was just poor management, and poor spending habits.

We have been so blessed by being more organized and disciplined in our budgeting, and even more so by being debt-free! In my next post, I'll highlight some of the blessings.

I wanted to add - if you are interested in opening an ING Direct savings or checking account, they have a referral program! Email me (through my profile) your name and email address, and I can send you a referral. If you open an account with a referral, you get a $25 bonus! (And I get $10 - every little bit counts!).