Our Approach to Budgeting

Every family should have some type of outlined budget. Simply, the amount of money coming in and money going out could suffice. If you don’t have a budget you should look to create one. I wrote about how we keep track of our budget expenses in a previous blog post here. Abby and I talk about our finances and financial goals on a decently frequent basis. It is not a topic we discuss every moment of everyday but it is an important dialog we have within our home. 

Over the years we’ve tweaked our budget to find a system that has been working well for us. This system works for our family but it may not work for yours. Take all, part, or none of the following budget information but regardless of what you do, make it a point to build a budget that works for your family. Don’t just build a budget, stick to it. Consistency is important. Following a budget will take sacrifice but your future self will thank you!

Three Bank Account System

Each bank account has its own specific use case and designated purpose. As a family we have discussed each category of spending and what account an expense should go against. These bank accounts are not broken out into pockets of ‘my money’, ‘Abby’s money’, ‘our money’. Rather, it is sort of like a modified/modernized envelope system if you’re familiar with that concept.

Each account type is as follows:

• A Checking account.
• A Savings account.
• A Spending account. (Just another checking account but it is used in a different way.)

Checking Account:

This is our main bank account that a majority of the reoccurring living expenses come out of. We attempt to keep two months of expenses in our checking account. If there happens to be extra money beyond the two month amount then that money gets transferred over into the savings account. I wrote separate blog post about things we do to maximize our monthly budget/income here.

The checking account is used for the following expenses:

• Tithe
• City/County/School Taxes
• Car/home Insurance
• School tuition
• Vehicle gas*
• Vehicle maintenance
• House electric / heat
• Small house projects
• Cell phone
• Internet
• TV subscriptions
• Brokerage/stock account
• Children education fund

*Vehicle gas used to go against the spending account. After some discussions about it, we eventually switched it to go against the checking account instead. 

Savings Account:

Money in this account is used for the future. This account is to prepare for Murphy’s Law, “Anything that can go wrong will go wrong“. Having a savings account can help to alleviate stress from unexpected expenses. The money in this savings account is earning some interest every month. The small interest rate simply helps to boost savings.

The savings account is used for the following expenses:

• Emergency fund
• Bigger house projects
• Vehicle purchases
• Future plans

Spending Account:

Each month a set amount of money gets transferred into this spending account from the checking account. It took us months to tweak and find the correct number that worked for our family. We had to find that perfect balance between being restrictive, penny pinching, but also providing an enriching life for our family. Abby is the main steward of this account and she does a tremendous job doing just that. Abby wrote a blog post about budgeting from her perspective here. As a family we do our absolute best to stick to this account for what we deem ‘spending’. If a purchase has to come out of one of the other accounts Abby and I have a conversation about it. We do sometimes go off budget but the majority of time we are consistent. Consistency helps to smooth out the spikes of spending and over indulging. Limiting the impulses to spend or ‘swipe the card’ mentality helps our family to move towards the financial goals/plans we have set.

The spending account is used for the following expenses:

• Groceries/meals
• Diapers
• Hygiene products
• Clothing
• Toys
• Coloring / craft supplies
• Extracurricular activities (piano lessons)
• Birthday presents

Paycheck Breakdown:

The money that we make is disbursed differently between our three accounts.

Mine

After taxes, medical, HSA contributions and 401k contributions.

• 90% goes to the checking account.
• 10% goes to the saving account.

Abby’s

Abby is mainly a stay at home mom but does make some income through a couple of part time jobs. The majority of money that she makes goes towards leisure spending and family necessities (spending account). The portion of money that does go into the checking account from her paycheck mainly goes towards taxes and tithing.

• 20% goes to the checking account.
• 80% goes to the spending account.

---

At the end of the day no matter what you do, have a unified plan as a family. Sit down, evaluate things, and build a budget that works for your specific circumstances. Even if your single, establishing and living off a budget is very important. Getting your finances in order earlier in life will set you up for greater success and stability in the future. Pray and work hard to stick to the budget that you buildout.