Lately, we’ve been getting a lot of questions about some of the specifics of our budgeting strategies. And while we’ve covered the specifics here and there, it’s high time we recap the ins and outs of how we budget.
How Our Monthly Budget Works
As many of you know, Johnny and I keep an itemized budget, meaning that we track each and every cent that we spend. Here are two posts for any of you looking to get started with budgeting:
And you can see an example of how we categorize and track our expenses in our monthly budget breakdown here:
For day-to-day tracking, we use the HomeBudget app, which syncs to both of our phones and keeps the budgeting process fairly painless, while still holding us accountable.
Johnny also tracks our net worth from month to month with a really nerdy Google Doc spreadsheet he created. It tracks how much we’ve gained overall in savings and investments and allows him to geek out.
How We Budget Variable Expenses
As much as possible, Johnny and I try to guesstimate variable expenses from month to month, such as gifts, that must-have wolf shirt, or a last-minute weekend away to stave off work burnout. At the beginning of the year, we decide how much we’ll spend on gifts for our immediate family (x amount on sibling gifts, y amount on parent gifts, z amount on nieces, etc.). And depending on the number of birthdays each month, we tweak our budget accordingly.
We also calculate how much we plan to spend on vacationing for the year. For instance, this year we plan to have a few weekend getaways, go on a summer vacation, and attend a wedding in DC, so we created a budget that we have to stay within for all of those trips.
But what about unexpected expenses that come up during the month, from buying a gift for your neighbor’s 30th to getting a new shirt for an upcoming interview? Those kinds of expenses, though unexpected, should never call for dipping into your emergency fund. Well, that’s when our “Everything Else” category comes into play. Even though we itemize our expenses, we have an “Everything Else” category that serves as a catch-all for our unpredictable budgeting categories (baby supplies, entertainment, gas, as well as a misc. category). We set a limit for the entire “Everything Else” category, but we can spend as we please within it, which leaves wiggle room for unexpected gifts, doctors visits, or splurges. If you want more details about how it works, we did a post about it here:
And that is how it’s done, in the OFB household at least. Any other questions on our budgeting specifics? Care to share any budgeting strategies of your own?