Welcome to the start of The Teacher’s Salary series!
Feel free to leave me a comment or send me an email if you have any suggestions for future topics.
Click HERE to see links to some of my posts from this series.
Before we really dive into this series and today’s topic, I feel like I have to put this whole budgeting topic in perspective. While I certainly have moments of frustration with the fact that The Teacher has not seen a pay raise in 6 years and that teaching in general is an underpaid profession, I know one thing.
WE ARE RICH.
I’ve had to give myself some reality checks through the years. Compared to the rest of the world, a teacher’s salary is very wealthy. It’s a tough pill to swallow some months when I sit down to pay the bills, but it’s a good reminder. Keeping things in perspective is important.
Now, onto the first topic and one of the most important ways we are able to live on The Teacher’s salary. Today, let’s talk about the basics of budgeting. There is no way we could survive each month without planning our spending ahead of time….or in other words, creating a working budget each month.
What is a budget?
A budget is nothing more than a plan for how you will spend your money. Rather than your money just quickly exiting your account, a budget is your way of telling your money where it will go in advance. There is nothing magical or mystical about it. It can be written out on a scrap piece of paper if you wish. It doesn’t have to be complicated.
Why budget?
Setting up a monthly budget might sound strangling and stifling, but I’ve found that it does the opposite. By telling ourselves where our money will go ahead of time, there’s no guilt in spending it. And if we’ve budgeted accurately, then there should be no wondering about whether or not there will be enough at the end of the month.
How It Works for Us
The nuts and bolt of how to set up a budget is very personal. Depending on your personality, you may choose to use a software program or maybe you are a pencil and paper sort of person. Here’s what has worked for us.
Who
If you are married, it’s important to talk through who will prepare the monthly budget. At some point during our engagement, The Teacher and I began talking about who would be the money manager. Since I’d always enjoyed balancing my own checkbook and The Teacher didn’t seem interested in starting to balance his, we decided that I might be better suited to take on the role.
From what I understand, it’s fairly common for one person to be better at budgeting. While that might be true and work well for many people, we’ve found that it can sometimes be overwhelming for that person doing the budgeting and the other person can sometimes feel left out of the process.
I typically plan the preliminary budget for the upcoming month, but The Teacher and I will sit down together to review it and make any adjustments as a team (I don’t always know when his car needs maintenance, etc). He feels like he’s part of the process and I feel like I’m not carrying all the weight either. We’ve also implemented a weekly budget check-in meeting to ensure we are both on the same page as the month progresses.
The main thing is that you find out what works for you as a couple. If it works better for one person to do it, then great! But maybe you’d prefer to rotate back and forth each month.
When
Since The Teacher gets paid at the end of every month, I sit down to start the budgeting process a couple of days before he will get paid. We don’t finalize everything until his paycheck has actually hit the bank (in case there were some differences that we weren’t expecting), which sometimes means that I have to mail bills out very quickly to avoid late fees or pay them online.
How
I use a handmade Excel spreadsheet for our monthly budget. It might sound complicated, but it’s really pretty simple. I set up the spreadsheet so that it has numerous tabs along the bottom.
The first tab is labelled OVERALL and is where I do the budgeting for each category. This sheet has a list of each category, along with any subcategories, line by line, so that I can make sure I don’t miss any foreseeable expenses. You can add as many or as few categories as you need.
Our categories include:
– Giving: (tithing, charitable giving)
– Housing: (mortgage, utility bills, home maintenance, etc.)
– Transportation: (car savings, gas, car maintenance)
– Food: (groceries, household products, hygiene products, etc.)
– Clothing: (clothing, any dry cleaning, etc.)
– Personal: (haircuts, gifts, etc.)
– Entertainment/Recreation: (eating out, recreational activities, vacation savings)
– Medical: (doctors co-pays, medical bills, prescriptions, etc.)
– Debt: (any balances we might have on credit cards) **We pay these off each month
– Savings: (anything we are saving for that is outside of retirement)
I have the spreadsheet set up so that I can see a running total of what money is left after I have entered a value for each category and subcategory.
Some lines are firm based on what bills are owed, but the remaining categories/subcategories are often flexible each month. I tweak those values based on what I think we will spend or what history has shown me we will need to spend.
Once I’ve entered everything that I can foresee, I check to see my total at the bottom. I make adjustments to the categories based on whether I’m over or under. If I’m negative, then I may have to cut something. If I’m positive, then I have extra money leftover to allocate somewhere else! I don’t like to leave the value positive, so I actually put that overage in a category somewhere.
When I’ve finalized the budget on the OVERALL tab of our spreadsheet, the category totals will automatically populate each of the CATEGORY tabs that I have set up on the spreadsheet. Once the month begins, I track our spending under each of the specific CATEGORY tabs.
Important Note:
It’s not important which tool you use to set up your budget. The most important part is that you choose a method that will work for your family and that you are likely to use. It needs to be easy and something you can actually implement. My mother and grandmother use ledgers books, my brother-in-law raves about Quicken, and someone else might use a Smartphone App. The method is not as important as the process itself. If you like the idea of a computerized method, just ask someone who is tech-savvy to help you.
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Ariane says
I love this post. I'm a huge personal finance nerd, and actually work in finance, too. Budgeting is so fun to me! I love using Excel to track my expenses each month, tally the categories, and compare the totals across months. So far, I have 17 months worth of itemized expenses, and it's so handy to have that history for analysis. Told you, big nerd over here!
steddins@hotmail.com says
Sounds like you have a great system going! I've often wondered about switching to Quicken but Excel usually does the trick fine for us. Yeah for budgeting nerds! 🙂
Unyque One says
Could I have some picture examples? I just need to put a visual to this explanation. It's a great one by the way.
steddins@hotmail.com says
What sorts of pictures were you thinking would be helpful? I'm planning to update this post a bit and will see what I can do!
Starr says
I too am a super visual person. I would love to have a downloadable copy of your budget worksheet! My husband and I are now on step 3 of Dave Ramsey's plan but I still struggle with budgeting. I have also just started using YNAB and it seems good so far. I'm a excel junkie though 🙂
steddins@hotmail.com says
I'm not the most tech-savvy person, but I'll look into trying to make my spreadsheet downloadable. Thanks for the suggestion – I probably should have thought of it myself! 🙂
Alison P. says
I have all of my expenses in a spreadsheet with tabs and I have the last 5 years in the spreadsheet mine breaks out with the bill name like the electric company. The next column is when the bill is due, and then there is a column for each month. I keep the bill amount in from last year because it gives me an estimate of what they are going to be this year. Any unpaid bills are in a different color text (like red) and then I make them black when they are paid. The total adds up at the bottom and then there are the paychecks and other money coming in that gets added below. It gives the whole year at a glance and lets me know if we are going to end the year positive or negative. I love using excel and I have changed mine a few times over the years to make it work for us!! I think that I cut and paste a little picture of mine into one of my blog posts.