I had some questions about our cash spending budget and I know it’s been a while since I discussed how we budget and how we do a ‘no spend’ month. So what better time than now. We are jumping back in to the process in October so I’ll give you the low down on what we do and how we’re doing. And then I’ll check back in from time to time to update you.
The Background:
So we do a combo of a couple different methods. First, we (and by we, I really mean me. The Mister just goes along with it) adhere to the Dave Ramsey cash spending method. I really like him and what he has to say. You can catch his podcast online or sometimes I can actually listen to him on the radio when I’m in an area that has a station that he’s on. Anyway, he believes “Cash is King” and to not use credit for anything. Literally. Pay cash for a car. Buy used. Don’t take out loans. And that it is possible to purchase things with zero credit. As in you don’t have a credit score because you use cash.
His method also gives you ‘baby steps’. You start with looking at your finances, setting up a budget, and saving $1,000 in an emergency fund. Then you start paying off your debt with the debt snowball method. You line up your debts (not including your mortgage. That’s a different step) starting with the smallest to the largest. You pay all the minimum payments on all the debts except the smallest. With the smallest you pay extra (all the extra money you have). Then after that debt is paid in full, you roll all that money over to the next debt, including the minimum payment for that debt. So for example, you have a doctor bill for $500 and the minimum payment is $50. You have an extra $100 per month to pay on bills so you pay $150. Then you pay that bill off. Your next bill is a credit card with a $5,000 balance on it and a minimum payment of $150. So you pay $300 each month until it’s paid off. So on and so forth.
So you do this until all your debts are paid. Then you start saving for 3-6 months worth of expenses. So if your total monthly expenses are $2,000, you save anywhere from $6,000-$12,000 in a savings account. Then you start investing 15% of your household income into retirement. The next step is to fund your kid’s college fund(s). And then you start paying off your mortgage. Finally you start building wealth and giving money. Some people do all these steps within months. Other people take years. You should listen to one of his shows where he interviews people who are worth over a million dollars. And I’m not talking the stockbrokers. I’m talking the shop owners and working class people who have worked and saved and invested wisely. It’s amazing. One of the questions he asks is ‘what is the most you’ve ever spent on a pair of jeans’. I haven’t listened to the show enough to find an average of what they’re answers are, but I’m pretty confident in saying that they only spend $20-$50 on jeans. And $50 would be a splurge!
Okay. So that’s Dave Ramsey in a nutshell. You can check out his website for more information. And check to see if there’s a local-to-you class. We also adhere to the No Spend method as well. The No Spend method was developed by Anna Newell Jones. She was heavily in debt and decided that she needed to not spend money at all in order to curb her spending. So she outlines how to do just this thing in her book The Spender’s Guide to Debt Free Living. She explains how to set yourself up to not spend money unnecessarily for a month (or longer if you so desire).
Here are the basic principles from her plan (as taken from Amazon.com):
1. Create a personalized Debt-Free Life Pledge.
2. Understand where your money is going when you’re in debt, and where it will come from to pay it off.
3. Learn why putting money into a savings account before (or while) paying off debt may not be the best idea for you.
4. Find additional income sources and generating side gigs.
5. Re-integrate spending into your life once you’re out of debt, so that you stay out of debt.
So you can see that there are some similarities between the two methods, but also some major differences. I’ll outline what we do and how it works for us. Then hopefully you can take all this information and find a system that works for you!
Our Method:
At one time we had a dual income and would spend money like it was going out of style. And then we realized that that was foolish. We needed a savings account. So I set up three accounts: a checking, an emergency fund, and then a savings that I couldn’t touch without going into the bank. We keep $1,000 in the emergency fund and also $1,000 in checking. Our monthly bills are right around $700 (not including car insurance which I pay in full once per year). So I keep a cushion in checking in case something comes up that I need to use my debit card or write a check for. Reasonably I could wait to pay something until I’ve gone to the bank to transfer money but this gives us a little cushion. So each month I go to the bank and I transfer all the money over $1,000 to our savings account that we can’t touch. It’s funny how the bank tellers will get to know you and ask you what magic you’re working on today! No joke. I walk into the bank and I have one teller in particular that I always work with. She gets it and is so patient. And then when she looks at that savings account, her eyes get wide! The last time I was in there I was less than $100 away from the next thousand and it took everything I had to not transfer money to make it a nice even number. I’ll look forward to that sometime this month though!
Now, before you say ‘your expenses are only $700?!?!’, let me explain some things. We live rent free. We don’t have any utility costs as well. We live where my husband works–at the fishing lodge. And part of that deal is free living space. Before you think it’s all romantic (well, it is pretty romantic) let me also tell you that we live in the house with other people from April-September. A few people will filter in and out before and after those months, but pretty much expect a full house during those months. We also have motel units right behind the house. They’re open from April-October. So you can expect other people milling about during those months too. So yeah, living rent free but with some drawbacks. Not bad though.
I also need to explain that our income was cut drastically (by about 2/3) a couple of years ago. And we ended up moving to the fishing lodge because of that. Before that we rented a house down river from where we are now. It was a great house, a great layout, and a great location. But things change. Life throws you curve-balls and you figure out how to adjust. For a few long months I wondered how we would survive with the Mister’s seasonal income. But we made it work. And then I started Chicken Librarian as a business. And I put some money into that. And I was working very part time at about four different jobs (you can read about that in previous posts from this past summer). And then I started stressing about finances, as one does. And I looked into our account and was very surprised at how much money we’d saved. I don’t know how we did it (there wasn’t a concerted effort. It just happened). And the Mister’s seasonal job is starting to wind down until next March and I thought now would be a really good time to think about cash spending and go on a ‘no spend winter’.
So we’ve been able to save about 1/3 of our income. Another 1/3 goes towards our bills. And the last 1/3 is spent between my business and our other ‘needs’. I put needs in quotes because I think we still have some frivolous spending. Which is why I want to do cash spending and no spending. The no spending is what we use to keep from spending money on needless things. The cash spending is spent on things like groceries, pet food/supplies (vet bills would come out of our savings account), gas (car repairs will come out of savings), and other supplies (toiletries, etc). So as of today we have well over the 6 months of expenses saved. Our outstanding bills include a credit card and my student loans. In the spring we’ll pay the credit card off and start the savings all over again until we have enough in the bank to pay off the student loans. We’ll need a newer car sooner rather than later and we can use some of this money to buy a new-to-us car. But I won’t do that until I absolutely have to.
Our budget:
I’ll give you a run down of what our budget looks like. Actually, we didn’t really break it down like we normally do. We just decided that we would just get $400 out of our checking account each month and see how it goes. So the $400 is roughly broken down as follows:
1. $200 food (eating out and groceries)
2. $100 gas
3. $100 animals
We’ll see how we do. I totally blew it thus far. I took out $400 at the end of September and just went crazy. But I’ll take out another $400 and start all over. It’s all about finding your balance and getting back on the wagon. You’ll eventually figure out what works and what doesn’t work.
I will also say that before I start doing any sort of major no spend I will make sure I’m stocked up on things that I need so that helps with not spending needlessly. So I went to the thrift store yesterday and bought $35 worth of clothes and some dishes (for $3!!). I also went to the dreaded Wal-Mart. A place I never shop at any more but I needed a 2 gallon glass container for our laundry soap that I make (they’re $25 on Amazon and only $13 at Wal-Mart). While I was there I stocked up on toiletries, grabbed some groceries, and other items that’s been on my to-do list for a while. So some of that $400 that I already took out went to some of the above. I also purchased most, if not all, the supplies I need for my upcoming Chicken Librarian classes. I do have a business account for those things but sometimes I still need to use personal money to pay for expenses.
One last detail to note. I’m working a very part time job this winter (only 1!!!) and that will be enough to cover our monthly budget–cash spending and bills– without having to dip into that savings account unless a big ticket item pops up. That’s our goal. Keep with the necessities until next Spring, reevaluate, and then pay off a debt. That’s why I say we loosely follow the two methods above.
Okay. I think that’s enough. After reading all this and digesting it, let me know what questions you have. Do you have a budget that works for you? I’d love to hear your success stories and what hasn’t worked for you.
Mare
Wow! I don’t know how you do it. One question I have is what health care fund do you have? I feel as though health care costs (and the risk of not having health insurance) is a ball and chain around my ankle. I’m terrified of leaving my job over this factor. It has plagued me my entire adult life.
chickenlibrarian
Ah! Yes! The old health care issue. Well, without going into too much detail, our health insurance is included in that $700 per month of bills. When you’re income is cut by 2/3 you tend to live in a lower income bracket and qualify for reduced care rates. It’s not the best health care but it works. I just went to the doctor for all my yearly exams. I just call the insurance company prior to setting up appointments to make sure things are covered. I discuss with my doctor(s) about not doing any test, etc. without asking. Preventative items are covered under your insurance plan (i.e. mammograms, diabetes testing, etc.). Now, what would happen if we had something happen like in your case? I’m sure it wouldn’t be pretty. But that’s another reason we save, save, save. But I totally understand where you’re coming from. I feel very lucky and blessed that we’re able to do what we’re doing and make it work.
Maria
Love your post!! I can totally relate to it all!!
chickenlibrarian
Thank you Maria!! I appreciate your support and your comments ❤
Elizabeth Kaden
Hi! I am so looking forward to making a new budget when our income finally stabilizes. up until now(since the move) it’s been try not to spend anything! But things are looking up at last. I used to track everything on Mint, and then I could see the obvious problem areas. We do pay for just about everything with a cash back credit card that I am always careful to pay off every month. We earn a lot of money back that way.
chickenlibrarian
I used Mint for a while. I’m not the best record keeper so something that’s automatic is nice that it just updates and then you can see where you are spending. But believe or not, I think most of our spending goes towards food–groceries and eating out. But shopping at the farm market every week with just $20 has been huge. I’m going to do a follow up post with all that kind of information. And YAY to income stabilizing!
Shugunna Alexander
Really informative post and encouraging. We are in dire need of a new budget, one that fits our lifestyle. I’m a spender as well as my husband so it’s really hard to get us on one accord. This is something to work towards though.
chickenlibrarian
The Mister and I are not savers at all. That’s why it’s been so important to do the cash spending and then saying no to anything else. It’s hard, especially when I want to go somewhere and we have to say no because ‘we don’t have the money’. But that’s also how we ended up with all the extra money in the bank. So I guess it was worth it!
Tracy
Wow! Thank you so much for sharing such detail and really putting a lot into this post. It will surely inspire and help others get started if this is something they want to do/pursue. I had my husband read it too, and he thought it was interesting. He did wonder, though, about your grocery budget. Ours is about $440 / month (budgeted, we certainly go over this from time to time) and it’s just the two of us. We count paper goods (think napkins, toilet tissue), personal care items, dish / laundry soap, etc. in our grocery budget, so it IS more than just food. Not that you have to answer this – you have truly given a lot of your time already on the subject! – it was just something he noticed.
Anyhow, you DID inspire me! I know of Dave Ramsey (the $1000 in emergency savings is one of the easiest and best things you can do – if there is one take away from Ramsey, that’s the one for me), and I understand the rationale for cash spending. This was something that I needed to get back to and officially did this weekend. The first step was actually switching banks. My “old” bank was too far from where we moved to in 2017, so I have been using the debit card. While handy, it’s just not the same as practicing “cash spending.” Yesterday I switched to a bank my husband already uses with branches REALLY close by. Payday will come – direct deposit, of course – and the next morning, I will withdraw the cash I need from the nearby branch. This might be more of a mental change than anything, but I feel like I am starting to put my plan into action (so many things to do in that plan!). 🙂
So thank you again for sharing such honesty and detail in your post! What a gift to your readers!
chickenlibrarian
Thank you for reading and for such a thoughtful response!! I’m so glad you made some changes that will hopefully help with saving money. As to your questions…I’m planning a follow up post. The other post was just so long and had so much info in it that I didn’t want to overwhelm any more than I already had. I’m planning on addressing the grocery budget. But it mostly involves shopping at the farm market. But yes, you and Mr. Gordon are correct that it involves more than food. So I’ll say “stay tuned”. I’ll be adding a post in the next couple of weeks outlining all that information!! Thank you so much for always being so supportive and asking the questions that I forget to answer ❤
chickenlibrarian
Oh! I also meant to say that I’m glad you changed banks too. My bank is 30 minutes down the road (also in town where we lived in 2017). I pay fees if I withdraw money in my current town and getting back to my bank sometimes takes planning. But I really like my bank. They know me. They know how I operate. So I’m trying to make an effort to go to the bank and withdraw money when I’m doing my transfers. But kudos to you for making that effort. It’s a lot of work but now that it’s done you’ll hopefully be saving a lot more money and time!
Melinda
I love this post! I could talk about budgeting all day (I’m super exciting, I know 😉 It sounds like I would agree with most of the Ramsey method (mostly because I already do it, lol.) The one thing I do differently though? I USE my credit card to make me money! I guess maybe a lot of people wouldn’t have the self-control to play it like I do, but it works for me beautifully. I only put on the card what I already have money allotted for – things like grocery money and gas. And then I earn the free rewards all month long, pay off the card at the end of the month and viola! Free cash back! The card companies probably hate me, but I love the extra $60-$75 (sometimes more!) or so at the end of every month. Free. Money. 😉 Great post, Kristin! Loved hearing about how you guys make the magic happen! 🙂
chickenlibrarian
It’s so fun saving money but you have to get to that mindset first. And yes, I’m sure Dave Ramsey would disagree with you but I do know a lot of people who use their cards for cash back. I think the issue is just what you mentioned…people don’t have the discipline to pay that card off and act month and therefore get themselves into trouble. I’m going to do a follow up post on how we live frugally and I hope you’ll share some of your frugal living experience too! ❤️❤️
First Frost | GardenCookEatRepeat.com
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