We are now *officially* a one-income family. My maternity leave benefits have ended, and the paperwork now shows that I am no longer employed. Logic tells me that we can surely live well on one income, as long as we have a budget.
Budget. Yuck. Every time we have tried to set a budget in the past we have failed. We did all the right things…
- We outlined our monthly income.
- We allocated money for all of our bills.
- We made sure we were putting money into long- and short-term savings.
- We determined monthly spending amounts for necessary categories such as food, gas and clothing.
But it just didn’t work. I don’t spend $30 a month on clothing; I buy one good-quality item and then don’t buy anything for a while. I don’t buy just enough food for the week, because I prefer to stock up on grocery deals when prices are excellent, which might mean buying 10 lbs of cheese at one time, or a dozen green peppers to slice and freeze. So, since traditional budgeting wasn’t working, I started using the simplest money-management system I could think of.
I drew on money maven Gail Vaz-Oxlade’s rule that says you have to WRITE IT ALL DOWN. That was my starting point. I grabbed a clipboard and some lined paper, because I’m a pen and paper girl. Are you ready for the brilliance?
On one sheet of paper, I made two columns, because my husband gets paid twice per month. Under each pay period, I listed all of our committed expenses that are covered by that paycheque – including bills, donations, investments, and deposits into our savings accounts. Then I totalled each column. This sheet of paper stays on the clipboard all the time.
On a fresh sheet of paper, I wrote the date of the next payday. I noted the amount that would be deposited into our account and subtracted the committed expenses for that pay period. The remainder is what is available to spend. It needs to cover all our variable expenses – groceries, gas for our vehicles, clothes, home maintenance, and anything else we might need to pay for. Each time we make a purchase, it gets listed on the paper and deducted from that amount. Check out an example:
At any point, we can look at the clipboard and easily see how much money is available. It’s basic. Low-tech. Easy-peasy. Once the balance on that sheet of paper reads $0, we have to stop spending until payday. It sounds reasonable, right? But it takes willpower. We have credit cards! I *could* keep spending after the money is gone. But then I either have to use the next paycheque to pay it off, or start accumulating debt. I don’t want to do either of those things.
This is a really, truly simple way to track your spending to make sure you are living within your means. It clearly shows that money is a finite resource. It can only be spent once!
You might be wondering how a system like this works for larger expenses. For example, how do we cover Christmas gifts and family vacations? This happens through the magic of sinking funds. A sinking fund is a separate space where you set aside money on a regular basis to cover a larger, irregular expense. It could be an envelope that holds cash, or a dedicated bank account. In our family, we use five ING Direct savings accounts for: Fun Money, Emergencies, Christmas, Property Taxes, and Farm Share. Each month we contribute a set amount of money into these accounts. They are set up to take place automatically, so we don’t even have to think about it. These monthly deposits form part of our committed expenses, so we can be sure to have the appropriate amount of money available when the need arises.
In this busy season of our lives, the last thing we need is a complicated money management system. This is as simple and it works. I’ll take it.