Financial tips that work for us #2

Hey everyone! Today I want to go over some financial tips that I find myself and Brandon doing in our day to day life. It’s crazy to think that a year ago we still had our mortgage, a student loan, and three car payments!! Now we have zero debt payments. We do have a good income, but if you’re keeping up with the news, you’ll see articles about people with high incomes that are still living paycheck to paycheck. Having a good income gives you a leg up, but only if you use it wisely. Your habits and behavior are what really make a difference when it comes to your financial wellbeing. If you’re interested in my first financial tips post, you can check it out here!

Have a budget

So before I can go into any other tips, I must reiterate the importance of having a budget! Before the month starts, you should know where all of your anticipated dollars are going to be spent. You should know what your gas budget looks like so you can say no to a spontaneous trip or be prepared to take it out of a different category, like entertainment. We subscribe to the budgeting philosophy of ‘roll with the punches’, which is a big part of the YNAB app/mindset. Go over in one category? Cover it from another and either take it as a fluke or readjust expectations for next month. Our priorities are 1. Stay out of consumer debt and 2. Save for our goals. Goals would be #1, but we would prefer to be a month behind on our goals if it means using our savings dollars to replace a water heater or fix a transmission instead of debt. Hopefully those things don’t happen, but there’s a good chance they could!

Save monthly for yearly expenses

I used to have an overall ‘annual’ fund that I would contribute to each paycheck and hope it would cover my annual expenses. Now we put all of our expenses in categories that we fund monthly. Here are a couple examples!

1. Vet: $250/year, $20.84/month
2. YNAB subscription: $105.92/year, $8.83/month
3. Prime subscription: $150/year, $12.58/month
4. Truck and trailer tags: $73/year, $6.02/month
5. Fusion tags: $258/year, $21.46/month (we’ll keep funding this as is until we learn the updated cost for our new (older) car during the next renewal!)

Of course we also have property taxes, insurance, gift funds, but those were just a few examples. Tracking these expenses separately will help you see their true cost. If we wanted to get rid of Prime, we could save $12/month (but we personally find the value in this with my 5% cashback Amazon card). Also as you can see, a new car is much more expensive to register each year than an older vehicle. If you’re thinking of changing vehicles, you could visually see how those annual/frequent expenses like registration and insurance may be affected. Tracking yearly expenses monthly will also help remind you of what you’re subscribed to. You wouldn’t believe how easy it is to forget you have an annual subscription and scramble to find the dollars (or go into debt) during renewal time!

Weigh financial impact before you commit

This topic aligns with having a budget, but when each dollar must come from a designated (or new) category that has a set amount of dollars assigned, you tend to be more careful of what you sign up for. A big one here is streaming services! Each price hike makes us pause and decide if the benefit is still there. Here are a few things that we do choose to spend money on regularly:

1. Orkin: Our house is old and gets so many bugs! This is worth it for our sanity.
2. Disney+/Hulu/ESPN:
3. Netflix
4. Spotify
5. Phone plan

Now I’ll tell you what, I’m at my max capacity for streaming services. There will be no Peacock, Paramount+, Youtube premium unless something else gets the boot! That said, I may personally pay for a couple months of STARZ during my maternity leave to watch the new season of Outlander (but that would come from my spend money).

This can also make it easy to see what prices you may want to work on lowering. Last year we worked with the internet/cable company to lower our monthly charge (and stop paying for a landline we don’t have set up!). We previously explored changing Orkin to quarterly instead of bimonthly, but unfortunately the bugs acted up enough that we had to go back to a more frequent visit! Phone plans will be on our radar for next year. My phone is finally paid off, and I’m determined to save up cash for the next one to keep my monthly charge low. I think Brandon is onboard to do the same when we move to our own family plan, possibly next year. We may also play around with keeping a basic plan for kids/teens and a better plan for ourselves (with our on call duties) to also help with cost.

Budget early

It’s November 1st, and I’ve already planned our December budget! I’m not crazy, we just have a system of using our first paycheck to fund our next month’s expenses and our second paycheck to go towards savings. This means I had to have December’s budget ready by November 9th/10th anyway!

What I love about being so ahead with our budget is it gives us time to plan and react appropriately. We know so much about next month’s money that we can spend a little lighter this month if we need to save extra for travel/Christmas. I especially love this with my own spending category. I really want a new work bag for our next trip in office early December. To do that, I’ll need to order the bag in November. If I want to order it in November, I need to have money in November. But I also want to have some cushion in my budget in case anything comes up, so I’ll need to work hard to resist all other temptations!

Plan ahead for frequent household purchases

One way that budgets can get tricky is when it comes to items you need to have money for that don’t have a set replacement date. For us, this is our hygiene items, cleaning items, etc. What personally works for us is having two separate categories. One is called ‘Household Purchases’ and its monthly dollar amount is calculated by all of the items we use regularly around the house, the typical price per whatever size/container we buy, times the number of purchases/year. Then we take that annual amount and divide it by 12. Simple example:

Body soap: $5/container, every 2 months = $30/year

Toothpaste: $4/container, every 3 months = $16/year

Laundry detergent: $22/container, every 6 months = $44/year

Total per year: $90, Needed per month: $7.50

If you’re thinking that’s complicated, I kind of agree. I use a spreadsheet, and I promise we don’t update it often so the monthly number is set it and forget it. When we purchase anything from this category, I do like to put a note as to what household item(s) was bought in YNAB. This can help me make sure I’m setting us up for success by estimating the repurchase frequency appropriately. Or on the other hand, maybe we need to find ways to reduce how often we need to buy a certain item or maybe find a less expensive alternative to keep up with frequent purchases.

What about things we forget? Simple! We use a ‘Household Misc’ for things we don’t plan for such as chapstick, kleenexes, or a set of Tide to-go pens. We also use this fund for the infrequent purchase of batteries.

Find ways to reduce expenses

I love finding ways for us to save money, especially when it doesn’t even feel like a change. One way we reduced our expenses was by making our own glass cleaner, countertop spray, and all purpose spray. Now, we don’t really fly through these products so it will take some time to see the pay off, but after the initial investment cost (buying castille soap, essential oils, bottles), we don’t need to save for new cleaning products because all of our ‘ingredients’ either last a long time or can be found around the house! Plus, I really like the health benefits of not breathing in so many fumes while pregnant.

We also traded in our usage of napkins/paper towels during meals for cloth napkins! It’s so habitual now to just grab a cloth napkin, and I anticipate even when hosting in the new house we’ll give guests the option to grab a cloth napkin to use. This substantially reduced our usage of paper towels. The main use we still have is for anything that’s gross, like a cat hairball. Also, we can’t ignore getting an older car was definitely a way to reduce expenses! With insurance and registration costs going down, we stand to save at least $20/month!

Keep finances combined and have common goals… But have separate spending categories for you and your spouses’ sanity!

Rachel Cruze (Dave Ramsey’s daughter) gets the most pushback on her advice for married couples to combine their finances. Lots of reasons come up such as ‘But I don’t trust him/her with my money!’ or ‘That’ll just make us fight!’ but I think we can all agree that the root cause of both of these problems is not having a conversation about your life goals and finances. Money is one of the leading causes of divorce, so you should be afraid that you and your partner will have money disagreements. You should also work through them!

Plus, you will have nothing but resentment if one partner is working on saving/investing for the sake of the family and another is spending crazy on golf gear or a daily Starbucks/Target trip. You both need to have a clear idea of what you want your future to look like. You should both bear the burden of a financial crisis or make sacrifices towards your savings goal. This means you can both sigh and say ‘we did it!’ when you made it through an unexpected cost/emergency or hit your investment goal.

Now it’s important to give each person some spend money, no matter how little that may be. This is money that you don’t have to agree on. For instance, Brandon can spend some of his spend money on beer, and I can buy a digital art print from Etsy that Brandon insists I can make myself. No arguing, we can spend our spend money how we want!

Spare change category

Brandon and I saved for our baby fund by taking any credit card points, savings interest, or unexpected money and putting it a special savings category. I love looking back at the sheer number of deposits we made to this fund! We had some for cents, a couple dollars, and of course some bigger ones from insurance refunds or interest. This is one of my favorite ways to save because it almost feels like putting spare change in a jar! This will definitely be a hit when we’re saving for furniture in the new house or working on the last bit of our future mortgage!

KNOW YOUR WHY (repeat tip!)

When you’re building a custom home (especially a long term home), it can be a lot of pressure to get it right the first time or make it perfect on the first try. If I think of being stuck with this mortgage for 30 years, it makes me want to get everything done first because I’ll never have the margin again to do design changes or splurge on something down the road. However when I think of us paying our house off in 3-5 years, I have no concerns with picking good options in our budget (where it makes sense) and then being able to revisit certain rooms/finishes down the road when we don’t have that monthly payment. I like the idea of being able to really take my time, tell the sales person at Floor and Decor ‘yes I am working on a project!’ or visit a slab yard without feeling like an imposter! It truly feels like a short term sacrifice for long term peace and design fun!

I hope you enjoyed my financial tips. Remember, this is what works for us! So take what you like and just leave what you don’t. I’d also love to hear about your financial goals or tips that work for you or your family. Feel free to reach out!

Thanks for reading!

Davien