I’ve been budgeting with the app You Need a Budget (YNAB) for three years now, and it’s totally changed how I think about money. I’m in a much better place financially because I can see where my money is going and make sure each month is covered. Over the last few months, my wife and I have started budgeting together, which has made the process even better. Here’s how we approach budgeting as a couple.
Starting is the most difficult part of budgeting (isn’t that also the case with most things in life?). I started by gathering all of my accounts of liquid money and debt to factor into the budget. This meant hooking up my checking, savings, and credit card accounts to YNAB, as well as counting up all of my pennies for cash on hand. Once all of the accounts were hooked up, I had a sum of money to budget for the current month and future months, which is known as the To be Budgeted money.
This realistically meant analyzing a couple months of bank and credit card statements to see where my money was going. Things like rent, dining out, bills, etc. Once I had a pretty thorough list of categories, I put the To be Budgeted money in each category based on what the recurring expense was or my best guess on what I’d spend for that month.
Here are our current categories in our budget after a few years of tinkering and adjusting:
- Rent – could also be your mortgage
- Insurance – just our renter’s insurance, but it used to include auto
- Transporation – public transit and car rental, used to include gas too
- Dining Out – separate from groceries for better insight
- Medical Expenses – co-pays, associated costs, medicine, etc.
- Health & Wellness – deodorant, cleaning products, essential oils, etc.
- Recurring Software – our cloud storage, YNAB, stuff like that
- Investments – money we allocate monthly for our financial independence goal
- Retirement – money that goes into our IRAs every month
- Safety Net – a liquid emergency nest egg of 3 months total expenses in case something comes up
- Creative Tools, Supplies, & Equipment
- Home Goods & Furniture
- Entertainment – movie tickets, music, etc.
- Charitable Donations
- Travel – we budget a little bit each month to save up for vacations
- Education – for taking local classes and resources
- Stuff I Forgot to Budget For – catch-all for spending that doesn’t fit into a category, which I then create a category for
- Debt – we don’t have this category since we’re debt-free, but if we did have debt, we’d allocate money to this category every month to pay it off
Your categories could be totally different based on how you spend your money. Hopefully this helps you get a better sense of what the categories could be. In the past, we’ve also had categories for specific savings targets, like our wedding.
Every time we spend money we log the purchase in YNAB with the vendor, category, account, and amount. We always ask for a receipt, and then we log the purchase that day. We view our budget as something that’s living and needs regular attention, like a garden. By logging our purchases right away, we don’t forget any, and we’re also more in touch with where our money is going.
It was a new habit to form at first, but it has become second nature now. Most of the budgeting apps have mobile apps too, which makes it easy to log purchases on the go.
Logging purchases regularly is the most important aspect of budgeting for me because it’s much easier to log one or two purchases in a day than to log 30 or so at the end of the month. By turning it into a habit, it’s not something that I think twice about.
Whenever Abagail and I get paid, we log our paycheck transactions. That money then goes into the To be Budgeted bucket, which we allocate for future months and savings.
We get paid twice a month, and since we save over 50% of our income, here’s how we approach budgeting each paycheck:
- Our first pay period goes toward budgeting for future months and some savings.
- Our second pay period goes entirely toward savings and investments.
Covering future months is the secret superpower that budgeting begets. For example, once Abagail and I have budgeted for September, we’ll start allocating our money toward October. Once October is set, we’ll budget for November. This allows us to have future months covered and no longer live paycheck-to-paycheck.
Reviewing the Budget
We sit down together after work on paydays and budget our money. We also use that time to review how our spending has been going. By checking in on our budget together every other week, we are able to make sure we’re on the same page and that our money is going toward our goals and not elsewhere.
I can’t imagine reviewing our budget more infrequently, like once a quarter or every six months. We are able to hold ourselves accountable by reviewing it regularly.
Setting and Achieving Goals
Abagail and I use our budget to set and achieve our financial goals. Without visibility into where our money is going, I’m not sure how we would do this effectively.
The first goal we achieved was having a Safety Net of just-in-case money. This is a great place to start in the case of an unexpected expense or emergency. YNAB allows you to set goals for a specific category. So we created a Safety Net category with a goal and contributed money to it every month. Within about nine months, we reached that goal. There’s a real sense of peace when we know that if our cash flow stopped, we’re covered for a couple of months already, as well as having our Safety Net.
When we were planning our simple wedding, we set aside a little bit of money each month to go toward our expenses and rings. Since we knew we’d have a handful of purchases to make in the future, it made spending that money not stressful at all.
Our current goals revolve around spending less in certain categories and putting as much money as we can into our investments and retirement savings. Each month we’re able to quickly see what percentage of our money is going where. It’s really gratifying to see over 50% of our monthly budget going toward savings and investments.
Budgeting Doesn’t Rule or Ruin Our Lives
I like to think of budgeting like brushing my teeth. It’s something I do every day, multiple times a day, for my well being. It’s not a hassle at all. Honestly, I think it’s fun and empowering. It’s also strengthened our relationship because we’re on the same financial wavelength.
You have to be honest with yourself and not be judgmental when starting. What’s spent is spent. Your debt is your debt. Don’t feel ashamed of your debt or past purchases. It’s about the now. Making a budget will help you adjust your behavior, pay off debt, and save for the future. For so long I swept my finances under the rug by just making sure that I had a positive account balance or enough of a credit line to cover my purchases. The problem was that it wasn’t an effective long-term approach. If an unexpected expense arose, I was in a tough spot. Budgeting truly helped transform that.
Also, a little secret tip is that if you buy less stuff then you have to spend less time budgeting. 🙂
It’s worth noting that I’m not at all sponsored by YNAB. It’s just an app that I believe in and have been using for years. If you’re interested in giving it a try, you can sign up using my referral link and get a free bonus month. It’ll also give me a free month too, so thank you! The YNAB website also has a bunch of great resources on how to get started.
Let me know if you have any questions about how Abagail and I budget. It’s a continuously evolving process.