New Business, New Budget.
This post is sponsored by You Need A Budget. Thanks for your continued support of Daily Garnish!
In January of 2015 we set out on a path to start our own business. It didn’t happen overnight – it was more of a slow slog, really – but almost immediately we knew we needed to make changes. The biggest change of course, would be financial. The end goal of starting our business was always to eventually transfer Casey into a full-time role working for himself. Of course this meant a big financial change from what we were used to, so we had to start thinking about and managing our money differently.
In the past we’ve used programs like Mint, as well as self-made spreadsheets, but I am not a natural budgeter and I was easily frustrated by lack of customization and excessive advertising that came with some of these programs.
Recently we’ve started using You Need A Budget – a budgeting web app (with companion apps for your phone), that has really changed the way that we’ve been viewing and spending our money. First I’ll tell you a bit about YNAB and the way it works, and then I’ll share some personal ways we are tweaking finances and making changes! Exciting stuff!
And before I do that, you can click here to get your first three months free – no credit card required! Also, it’s always free for all students!
YNAB is really easy to set up, and it took me about one hour to get all our accounts synched and organized. You can directly import your bank accounts, credit cards, mortgage information, investments, etc. – so that you can see your full financial profile in the sidebar.
The philosophy behind the YNAB method of saving and organizing comes in four rules.
1. Give every dollar a job – This means that every dollar you have is accounted for – whether it’s budgeted, saved, or spent. This greatly reduces the likelihood of overspending or surprises.
2. Embrace your true expenses – This is one of my favorite features of the program. True Expenses are those things that come up periodically (but don’t require payments every month) – car repairs, a broken water heater, birthday gifts, travel, etc. Instead of seeing these as big lump sums that have to be dealt with in one month, using True Expenses helps you set money aside monthly for so you are prepared when the times comes.
3. Roll with the punches – Overspending happens to all of us. And instead of freaking out when a budget goes into the red, YNAB allows you to move money from one budget to another, so you can cover overspending.
4. Age your money – Once you get beyond the 30 day mark, you can start paying bills with money you saved 30 days ago, and get yourself out of the paycheck to paycheck cycle. This is also a great way to make sure you aren’t carrying balances forward on any credit cards.
Here are the basic budgets and expenses that we are categorizing for our family. My goal was to make it specific enough, but not to make it so detailed that it became unmanageable. Our Immediate Obligations are things that are monthly bills – these are typically the same amount every month, and rarely surprise us.
Our True Expenses are the things that need more specific budgeting – like kids activities and groceries.
This month, I signed Cullen up for summer swimming lessons so we are already over budget for kids activities – I’ll need to pull that money from other areas to cover the difference. Hopefully down the road as we’ve use the program longer, there would have been enough month to month roll-over to cover that excess. Same goes for the pet expenses, as we had to pay for Huey’s cremation and vet services, which were several hundred dollars.
And our Quality of Life Goals are the other extras that we’d like to save for. I’m not sure why they included the education categories here, and since they are part of our regular monthly bills I will probably move them into Immediate Obligations.
One thing I’ve always been frustrated by in other programs is the need to assign each transaction to ONE budget. You Need A Budget allows you to split transactions – meaning if I go to Costco and buy a bunch of different things, I can then break the transaction down from the receipt – allocating part of the total toward groceries, and the rest toward budgets for dogs, household items, kids, etc.
Without being able to do this before, our grocery budget would go way over because it often included other incidentals that snuck their way into the food category.
So with all of that said – I thought I’d share some basic budgeting changes we’ve tried to implement (and continued to work on) as we’ve worked to become more financially mindful and organized. We are by no means perfect or pros, but here’s what has been working for us this year:
Identify our priorities
For us this meant focusing our “extra” money on allocating for the things that are really important to us – travel and savings. With all of our family living thousands of miles away, travel is a part of life. And unfortunately, we can’t realistically pack up the car and drive to our loved ones – trips home require plane tickets – four of them! One change to the way we’ve thought about travel as we’ve worked on our budget is to pay more attention to the big picture – travel is not just plane tickets and accommodations. It is also things like dog sitters, destination activity money, and incidentals. It’s important to include ALL of those things in the travel budget, and not just the big pieces. We also try to use skymiles and promotions, as well as book far in advance to get the best deals.
Savings is self-explanatory, but obviously very important. Now that our income has shifted to both being self-employed, we are looking to be a lot more mindful of actively saving, and finding new ways to do this.
Neither of us is into fancy labels or clothes, and our kids wear very basic stuff that’s all bought on sale. We don’t have a ton of toys, and what we do have often comes from Craigslist or resale shops, or from neighborhood FB swap groups. But we do care a lot about the quality and source of our food, so we shop at higher end grocery stores and pay more for food that meets our family standards. I’m happy to wear old jeans and eat good cheese – again, all about priorities, because we can’t (and don’t need to) have it all.
Make small changes.
Budgeting 101 will tell you that many small charges will add up to lots of spending. And while of course we all know that, actually remaining mindful of it every day is another story. It’s easy to see something as “only $5” but spending that extra 5 dollars every day can add up to almost $200 each month!
I look for little ways to save by not buying drinks out, always searching for free parking, and trying to stick to free kids’ activities. It’s easy to spend $20+ on admissions to kids’ places, and while that can be tempting in the rainy slog of winter, this year I was much more mindful of sticking to the spots where we have memberships, utilizing free First Thursdays at museums, and getting more creative with art projects and activities we did at home.
Make big changes.
The biggest changes we have made in the past few years have been car-related. We traded in our big SUV and now I drive an entirely electric tiny Nissan Leaf! I can write more about this change in another post (if folks are interested), but it has been a huge savings to us. And I have found that it is actually plenty roomy for our needs (I can get my double BOB in the back!), and it is a million times easier to park in the city too. We pay zero gas, zero maintenance, and the estimated cost in electricity to charge the car is a whopping $150 per year. We also bought it when there were both federal and state tax credits available, so it was very affordable.
Casey has a business truck, and that was also chosen with affordability and functionality being the most important considerations. We are not fancy car people, so we are fine with base models, fabric seats, basic radio, etc. – since having fancier cars isn’t something that really appeals to either of us, it didn’t make sense to be spending any extra dollars there.
We also looked at things like fitness memberships and classes, prioritized and picked the things we wanted to do most, and cut out the rest. Part of what I love about running is that other than the gear, the workout itself is FREE, and it’s available right outside your front door pretty much all the time.
Stop throwing money away.
This topic is mostly food related, and it means to literally stop throwing money away. I get super frustrated when I fill up the kids lunch plates and they don’t touch them, and perfectly good food ends up in the garbage. These days, if they don’t want to eat something I don’t force it, but the plates go back in the fridge and are offered an hour later when the kids are begging for snacks.
It also means paying better attention to what food we already have, and using that up before we buy more. I tend to be the immediate gratification type, so I’ve had to really work on cooking and eating food that is on hand instead of always making exactly what we WANT RIGHT NOW. This has helped immensely in reducing our food waste, and cutting down on grocery bills.
Avoid impulse buying.
This is something that I have to be mindful of daily. It is so easy to grab those little things here and there, but I often regret them a few hours later (and they add up so quickly!). I actually don’t shop in stores (other than grocery stores) often at all, so for me the issue is online shopping.
With Amazon apps and discount coupon codes right at our finger tips all day long, it is SO easy to spend money without even really thinking about it. We are big time Amazon users, and recently I’ve been forcing myself to put things in my cart and wait a few days before checking out. More often than not, I end up taking most items out other than essentials because the “need” for these items wanes away pretty quickly.
I’ve also unsubscribed from most of the promotional brand and store emails that flood my inbox all day long. If I don’t know that Gap is having a 40% off sale, I’m not going to be tempted. I’m a huge sucker for sales, but I also know that buying something on sale is still spending money that wasn’t necessarily planned for or budgeted. Also, buying less makes the things that I do buy feel a lot more exciting!
So there you go – a look into how we’re managing the shift in finances as we navigate the world of self-employment and business ownership. It’s such an exciting time for us, and being more connected to our money gives me a much better understanding of our financial health on a daily basis, which leads to daily peace of mind as well.
This post is sponsored by You Need A Budget. Thanks for your continued support of Daily Garnish!