Thanks to Dave Ramsey’s ELP program for sponsoring this post!
The first month after we paid off our mortgage, Andy and I each got to choose a splurge. It was also my 30th birthday, so I asked for a splurgey turquoise leather handbag that I love so much we affectionately dubbed it “The Precious.” (As in: “Where is ‘The Precious?'” and “Can you hold ‘The Precious’ for me for a sec?”)
I was never really “a fancy bag person” but I saw that one in the store and I think I audibly gasped and petted its soft leather adoringly. I don’t believe things can give you happiness, but if they could? That bag would do it.
You know what Andy’s splurge was?
Socks. A lot of socks.
He threw away or donated all of his mismatched, holey, stretched-out socks and bought a new set of socks that were all the same brand and style so the sock-matching process is quick and easy.
Total cost: $20.
Twenty dollars for matching socks. That’s all it took for him to feel spoiled. Maybe that gives you an idea how tight our budget was for a while!
Ever since I wrote the post about how we paid off our mortgage, I’ve gotten lots of questions about the nitty-gritty of budgeting. How much did we spend for each category? How did we survive on so much less? So I thought I’d answer the questions I get most often in this little follow-up. If you have others I haven’t addressed, holla!
How did you make a budget?
This is what it looked like for us:
- Set your goals.
Andy and I agreed that our goal was to pay off our house in five years. (We missed it by a little bit, but that’s okay!) The real spirit behind that goal was getting freedom: in our job choice, in our ability to spend our money freely and give freely. So every other purchase was weighed against that goal. Do we want to eat out tonight more than we want that freedom? Do we want a new car more than we want freedom? Once we had a common goal, it made the other decisions easier. We knew what was important, and what wasn’t. - Put it all on paper.
Lay out your monthly income, and all your required expenses. (Mortgage, utilities, etc.) Now any money that remains after you’ve allocated your required expenses gets spread out in your other categories. Make a category that covers every possible expense! Our categories looked like this:- Mortgage (required payment)
- Mortgage (budgeted extra payment)
- Tithe (more on this in a sec)
- Power/gas bill
- Gasoline for the car
- Cell phone
- Internet
- Groceries
- Entertainment/eating out
- Clothes
- Our personal spending money
- Miscellaneous
Then we allocated each dollar we made to one of those categories. Every single dollar got a name and a purpose. Since we’d already defined our goals, we knew what was not important to us and we allocated less money to those categories.
You can see that we set aside extra money for our mortgage before we did anything else. We basically paid ourselves first, and used what was left after that for the other categories.
Our grocery budget each month was $300. (And we couponed like crazy to make that last!) We had $25 each to spend on whatever we wanted. Our clothing budget was $50, and we had $70 for date nights and any entertainment. We really learned how to stretch every single dollar! We found ways to go out to eat for about $15, and went to the dollar movie theater or came up with creative date nights to make the $70 budget last all month.
(This post shares a bunch of ways we cut costs in each category.)
3. Set up methods to stick to the budget!
We used “the envelope system” but without actual envelopes. We took out cash at the beginning of the month to cover all those categories, and bundled the cash with a paper clip and a post-it note that said “groceries” or “entertainment,” and once we were out of cash in a given category, we were done spending on that category until we got paid again.
This is the key to making a budget: you have agree on it with your spouse, and you have to realize that you won’t get it right the first time. It took us about 3 months of trial and error to settle on the right amounts for each category. The first month, we over-budgeted for food, and forgot to create a “miscellaneous” category for things like stamps or gifts. But we kept with it and corrected as we went, and eventually we got the categories and the amounts right.
4. Find what motivates you
My geeky little husband made an elaborate spreadsheet that showed our mortgage amount month-to-month, and you could play with it by seeing how quickly you paid it off if you added an extra $100 to the payment each month, or an extra $200 once… it was totally motivating!
Maybe you need to stick a paper thermometer to your fridge like the old telethons used to see how far you’ve gone, or some other visual way to track your progress. Figure out what that is, and do whatever it takes to keep your motivation and energy up!
You will fall, you will make mistakes. But if you keep getting back up, you’ll be spending $20 to replace all your socks before you know it. (ha!)
Did you put any towards retirement/kids college while paying off the house?
Yes. We always put 15 percent of our income into retirement. That came off the top of our income before we ever got our paychecks, so we didn’t really “feel” it. We put a little bit aside for the kids’ college, but not much. We’re working really hard on saving for that right now.
Did you still get each other birthday and Christmas gifts or was it more like…happy birthday, here’s your new couch, rug, amazing entry table, etc?
Yes, a little bit, but both of us are more into the idea of doing things together than getting gifts. When it came to Christmas, we each had a small budget to spend on the other one, and it was a challenge to see who could stretch their budget the furthest. If I had $100 to spend on him, I would go to ebay and spend it all on a gift card for somewhere like sears or home depot and get a gift card to those stores for ~$115, then combine that with a coupon and a really good sale to buy him a tool or electronics item that originally cost around $175. (That’s how I bought him his $200 router with a $100 budget.) (Here’s my post on how to save money on all your online purchases.)
Did you take family vacations you had to pay for?
Yes! Not expensive, luxurious vacations, but when we’re spending “fun money,” we’d much rather spend it on vacations and memory-making than buying more stuff, so that’s how we prioritized our spending. One year we watched cruise prices for six months in advance and got a four-night cruise for about $300 total. Other times we’d save up my hotel points from work and drive to Savannah, Georgia, or go visit friends in another state. (Click here for more on how we saved money on vacations.)
Did you go out to eat, ever?
Yep! We just found ways to do it inexpensively and creatively. We’d split an entree at a restaurant (and still always feel full!) and drink water when we were out.
If you ended up with an extra $15 (or any dollar amount) at the end of the month did you automatically agree to throw it at the mortgage or did you pick and choose when?
Every dollar was attached to a category, so if there was extra money, we knew we’d underspent on groceries or entertainment, so we rewarded ourselves by just spending it! If we had some entertainment money left over at the end of the month, we’d either roll it over to the next month and have even better date nights than normal, or just get it one “bonus” meal out before the month ended.
Here’s the big awkward one that you totally don’t have to answer but it does end up taking up a large portion of our income… did you tithe throughout the process?
YES! (If you’ve never heard of tithing, a lot of Christians believe in giving 10 percent of their income back to God, through their church or charities.) It’s always been so important to us to give back, so that’s one non-negotiable for us. I think just the act of giving – even when money is tight and it doesn’t feel like there’s room – does so much for your spirit to give you peace and, at least for me, reminded me that it’s not mine to begin with. We’re just here to manage what God gives us. (One of the greatest joys since paying off our mortgage has been how much it’s freed us up to give more. It’s absolutely addicting!)
Did you have items like cable, smart phones, and gym memberships cut out?
We didn’t have most of those things for most of the time. I had a smart phone through my job, but Andy didn’t get one until very recently when he started needing it for his job. We used a digital antenna and online streaming for tv shows and movies, and never had a gym membership. (I like to do exercise videos, like P90x, Insanity and T25, so that’s my alternative to the gym.)
How do you prioritize which debts to pay off first?
I’m a big fan of the debt snowball method, where you pay off all your debts from smallest to largest. We had some student loans that we paid off before we bought our house, so we knocked those out first. Here’s more on the debt snowball method.
Some tools for the process
I really love these free budget planning forms from Dave Ramsey’s site. I also LOOOVE his baby steps for getting out of debt. It makes the whole process seem more attainable because you just go one step at a time, and eventually you’ll eat the whole elephant. If you’re looking for more info on this stuff, I can’t recommend his book Total Money Makeover enough. That book will walk you through the process and get you pumped up and motivated.
Help from the Pros
It’s smart to get help from a pro when you want to make the most of your money. Dave Ramsey has trusted professionals to help you start planning for retirement, maximizing your savings for the kids’ college fund, and buying a home you love and can afford. Find a local real estate, insurance or investment pro in your area right here!
Anyone have budgeting tips to share? What are you doing to reach your goals?
This post was sponsored by Dave Ramsey’s ELP program, but all opinions are my own, as always!
