I have followed a written budget for seven years now, and I can confidently say that it is the number one reason I feel at peace with my finances. I don’t worry about whether or not we’ll have enough money to pay our rent or car loans every month; I know we will. The headspace this surety frees up allows me to focus on my dreams and keeps me on track to reach my lifetime financial goals. There are few things better than that! I know you all are excited to talk budgeting, so let’s get cracking.
So what does it mean, exactly, to build a budget? Dave Ramsey likes to say that budgeting is “telling your money where to go.” I like that image. A budget helps me be purposeful about how I spend and save instead of just closing my eyes and hoping. While there are many ways to track a budget (some of which we’ll be covering in the next few weeks!), building a budget is pretty standard. It’s all about two things — income and expenses — which make up your cash flow.
1. Calculate your monthly net income (your gross income minus taxes). For most of us, this is simply our paycheck.
2. Add up all of your fixed expenses. Fixed expenses are difficult or impossible to change and are the same (or roughly the same) every month: rent, utilities, your electric bill, student loans, car loan(s), auto insurance, health insurance, etc.
3. Calculate your monthly contribution to your financial goals. Like the experts say, pay yourself first. Put money into an emergency fund, reduce debt with extra payments, save for a down payment, save for retirement, and/or feed an investment account. If it’s a priority for you, include charitable giving in this step. Some people choose to do this as a percentage of their income (i.e. 10% for tithing), while others choose a set amount. Whatever you do, do not skip this step! Treat your savings like any other budget line item, not as something optional if there’s money left over.
4. Add up all of your variable expenses. Like the name implies, these are things that are not externally set, so you could, for example, cut back here if you wanted to move faster toward your goals. Examples include groceries, dining out, clothing, entertainment, gifts, travel, gas, personal care, etc.
5. Put it all together. When you subtract your fixed expenses, your contributions to your financial goals, and your variable expenses from your net income, there are three possible outcomes: you’ll either have a surplus, you’ll break even, or you’ll have a deficit. If you come out with a surplus, you can either save more or spend more (assuming you’re already saving the recommended amounts!). If you break even, perfect! If you have a deficit, it’s time to take another look at your figures (most likely your variable expenses), and adjust numbers until you’re in the clear. No more money “accidents,” people! By the time your budget is finished, every dollar will have a destination!
Easy to understand, a bit harder to follow in practice! But we’ll get to that soon enough. Your homework for the week: walk through these steps, and start calculating! If you’ve never made a budget before and are unsure how much to allocate for certain categories, I’d suggest looking back through last month’s expenses (maybe on a credit or debit card statement) and estimating from there. It might take a few months to get the balance across categories just right.
Next week, I’ll show you how John and I track our budget, and the week after that, we’ll have a special guest post on another tracking option!
Happy budgeting! And be sure to leave questions or tips in the comments!!
Hello friends! Today I would like to talk with you about our videographer. Yes, we are having a videographer at our wedding!! (Two of them, actually!) I am so very excited about this, and I think I am especially excited because videography was something we always knew we wanted, but didn’t always know if it was something we could fit in our budget. I think that the budget realities of weddings are not something that gets discussed often enough, so today I would like to honestly walk you through our path to videography, in the hopes that it could be of help to one of you. Let’s go!
As I said, we knew from the very beginning that we wanted a videographer. We hired an insanely talented wedding photographer almost immediately (yay Tanja!) and know without a doubt that she will capture beautiful and priceless moments from our wedding day. However, because we went over our budget to hire Tanja (which I don’t regret!), we only were able to allocate $1,000 for videography in our initial budget. I knew full well that that was wayyyyy too low, but I chose to cross my fingers and hope that something would work out instead of doing something more productive.
To complicate matters still further, John and I are unfortunately not a fan of any of the videographers we’ve found in Connecticut, Rhode Island, and Massachusetts. They’re just not our style, and most are so well established as to be prohibitively expensive, in my opinion.
No, our number one choice for videography was a little duo called Inkspot Crow. MacKenzie and Philip are based near us, in North Carolina, and I was initially introduced to them by my friend Meredith, who just so happens to be MacKenzie’s sister. We were immediately taken with their modern but classic filming style, and their story-driven editing. After working with them on a few projects through work, I also found them to be two of the nicest people around, and a great fit with my and John’s personalities. They are exactly the sort of people you want around on your wedding day.
So I inquired! And as nice as MacKenzie is, even her niceness couldn’t help the fact that their basic package (for filming as well as a highlight and feature-length film) was three times our budgeted amount (you can do the math there). So we sadly parted ways, though MacKenzie did offer to waive their travel fee if we could make everything else work, since they could combine the trip up North with a visit to her Mom. A supremely kind offer to be sure, but still, not much to go on.
Fast forward to last month. I received a completely unexpected and very generous gift, and immediately decided to put it towards video. With that gift plus our initial budgeted amount, we were suddenly 2/3 of the way towards our goal. At that point, we knew we could make it work, so we sat down and took an even harder look at our budget. Extra hors d’oevres? Gone. Custom cocktail napkins? Gone. Less expensive (but still awesome!) band in favor of more expensive band? Yes. Mini cutting cake? Now being made by yours truly instead of our caterer (more about this to come!). With these cuts and more, we were able to shift enough of our resources towards video to make it a reality for us. Thankfully, Inkspot was still available for our date!
I know that videography isn’t a priority for everyone, and if it’s not for you, then that’s totally fine! But if it is a priority, and you haven’t hired someone because you don’t think you can afford it, I would encourage you to look again. I would make those cuts and more three times over to have a moving record of our day. We have a lifetime to throw parties with awesome details, but only one chance to capture the ones we love the most in action on one of the most special days of our lives. I have never heard a bride say she regrets spending money on videography, but I have heard more couples than I can count say not hiring a videographer is their number one regret. I didn’t want that to be us, and thankfully, it won’t be.
I will leave you with a completely adorable story, and though I might not be getting all of the details right, the sentiment is still true. A family with two little girls lives in the same apartment complex as John’s sister and her fiance. They went over to babysit one night, and the girls begged to watch “their favorite movie,” which they watch at least once a week with rapt attention. Yes, you guessed it: their favorite movie is their parents’ wedding video. I have a hard time thinking of a better reason to hire a videographer than that :)
P.S. Make sure you watch the highlight films from Inkspot interspersed throughout the posts! They’re some of my very favorites.
I love getting email from readers! Y’all are the best, and Kelly’s email was particularly awesome. She wrote:
“Hello Emily!
I’m an avid reader of Peach and Pearl way up north from Massachusetts. My junior prom is coming up in May, and I have a dress dilemma. I was inspired by your posts on the Rosecliff Ball, and “beauty on a budget.” I decided that I could do the same for my first prom. I have the dress already picked out. However, I have no clue what I should do for my makeup/accessories. I don’t have my ears pierced, so I guess earrings are out of the question. Have any ideas on how to complete the outfit?
Sincerely, Kelly
First, I have to say that I’m tickled I have at least one reader that’s a junior in high school. Are there any more of you out there? Sound off in the comments! :)
Second, I loved prom, so I’m always happy to help. (John and I went together senior year! I will have to dig out some photos for you…)
I put together three different “looks”: one gold-toned, one silver-toned, and one more colorful. Happily, most of these accessories are interchangeable. And — bonus! — most pieces on here are less than $35, and many are less than $10. The general exception is the shoes… they were too pretty to resist, and all could be worn for years with proper care, so we’ll consider them an investment! The earrings are also all clip-ons, per Kelly’s request.
The Goods
A. Bracelet from Forever 21 ($8.80), heels from Nina ($89.95), clutch from Macy’s ($23.99), clip-on earrings from Macy’s ($32)
B. Clip-on earrings from Forever 21 ($5.80), bracelet set from Forever 21 ($4.80), shoes from Nordstrom ($79.95), clutch from Macy’s ($21.99)
C. Clutch from Macy’s ($34.99), shoes from Nina ($99.95, but I also loved these ruby-toned ones from Payless, and they were just $19.99!), clip-on earrings from Macy’s ($38), bracelet from Forever 21 ($5.80)
I also wanted to point out this pair and this pair of clip-on earrings I found in my search, though they didn’t make it into the final board.
On the topic of makeup I am certainly no expert, so I’ll just say that I love my Great Lash mascara and CoverGirl Lipslicks. Ladies, I’m sure our girl would appreciate any additional advice you could offer!
Kelly, I hope this has been helpful for you! And I hope you have a MARVELOUS time at the prom!!
One of the most frequent requests I get, on all platforms, is for a mortgage plan update. This is funny to me (the requests are usually random and out of the blue!), but I welcome it, and I understand it: there are not many people willing to talk about finances in a personal and detailed way. But here I am! Willing to talk! So let’s get into it, because we have made a shift since our last conversation…
A brief overview of where we’ve been:
Spring 2013: We buy our house! We pull together a 13% down payment, because that’s the most we could afford.
Fall 2014: After paying off our car loans, we use about half of what we had been paying to make an extra mortgage payment each month (directly to the bank), and the other half to build up a fund for our next car purchase.
Fall 2015: Car fund complete, we shift that amount we’d been paying toward our mortgage, too. Instead of paying down our mortgage directly, though, we begin transferring the extra monthly amount into a specific home brokerage account and invest it, with the goal of paying off the mortgage balance in one lump sum once we reach the amount we need. I talked about that here.
2018: We shift our strategy. Instead of paying off our mortgage as soon as our home brokerage account reaches the right amount, we plan to keep saving a little longer, until we’ve reached a large-enough amount of money that, if carefully invested, the returns themselves would be large enough to cover our monthly mortgage payment (meaning our mortgage would no longer need to be a part of our household budget). I talked about that here.
2022: With June in (public) kindergarten, we shift most of the money we had been paying for preschool each month towards an increased monthly transfer to our home brokerage account.
2023: Our home brokerage account reached the amount where we could begin taking withdrawals for the monthly mortgage payment… but we didn’t begin taking withdrawals.
Wait, what?!
Yes, indeed. In yet another change to the plan, after much discussion, we agreed that we wanted to keep rolling with our current situation indefinitely: paying the monthly mortgage payment to the bank out of our salaries, and contributing to the home brokerage account each month while letting it grow.
Why?
To put it simply, our standard of living was (and is) perfectly comfortable. We don’t see a compelling need in our budget for our mortgage payment right now. Our current plan is to do this for the foreseeable future, or until our needs change, or until it no longer makes sense. Just as I shared in my last post, the hope is that this account will eventually pay for college tuitions, weddings, a rental property, some really extravagant generosity, or – most likely – all of the above.
Suffice it to say, this gives us an incredible amount of flexibility, and peace of mind. We knew that, I think, but we recently had an experience that drove home just how much we value living below our means. Story time? :)
Recently, a house came on the market that we were very interested in. Though we had a few alerts set up, we didn’t consider ourselves actively looking, and so scrambled to get in touch with a realtor and get prequalified for a loan. We went to see it on a Friday, the day it went on the market, and then debated whether we should put in an offer almost constantly for the next 36-ish hours.
We ultimately decided not to. As we were debriefing on Monday (when, naturally, the house went pending), John asked me how I felt. Relief was my overwhelming feeling. The weekend had been incredibly stressful: not only because we were thrust into making a fast decision (when we are two of the slowest decision makers on the planet!) but, had we gone forward, we would have taken on a much larger mortgage with a much higher interest payment. Our monthly discretionary payment to our home brokerage account would have been essentially redirected towards paying our new mortgage.
Could we have done it without much change to our lifestyle? Yes, because we were already used to forgoing that money.
Would it have potentially made us feel more stressed? Almost certainly. When we’re paying ourselves each month, we know we can always skip a transfer if something comes up – but you can’t skip a mortgage payment. At work, John doesn’t have to hustle harder than he wants, or feel pressure to take the extra appointment at the expense of our time together as a family. We feel the peace of knowing we can release my salary if something were to change with our circumstances.
There’s a part of me that doesn’t like our current plan. It’s so open-ended! We don’t have a specific goal we’re trying to reach! The larger part of me, though, is extremely grateful. This margin that we’ve fought for — keeping our standard of living stable while our income has risen and costs, like daycare/preschool, have gone away — has given us an incredible peace of mind. It has helped us to be more present, joyful parents. It has helped keep our marriage happy and stress-free. It has allowed us to give generously and freely to the people and causes we love. All of this is of almost incalculable value to me.
As I was writing this post, chapter 10 from Morgan Housel’s exceptional book came to mind. “You don’t need a specific reason to save,” he writes. “You can save just for saving’s sake. And indeed you should. Everyone should.”
Does this mean we will never move to a more expensive home? It does not. Our run-in with the market last month actually gave us a lot of clarity on what we’re looking for in a next home, and what we would and would not be willing to move for. With a narrowed scope, we feel ready to go if the right home comes on the market, but also perfectly content to wait several years should it not. And while we wait, that brokerage account will (hopefully) continue to grow – making action even easier when the time comes.
And now, to one more practical question before we close:
Over the years, readers have asked whether our feelings about this strategy have changed since we shared it, especially given the market volatility during the pandemic. Did the market drop in March 2020 make us wish we’d made payments directly on our mortgage? What has been the emotional impact of this plan, now that we’ve been at it for a bit?
This is an excellent question, and one of the most important ones to get clear on before embarking on a plan like this yourself. In a way, I’m grateful that the pandemic drop proved what we thought all along: that we both have a high tolerance for market volatility and risk. We set out on this plan knowing what we had set aside could decrease in value – and we were okay with that, considering our time horizon and the purpose of these savings. Also, not all of the money is invested in stocks, and most of it is managed in a defensive style which is more protected from volatility. We also have a fully-funded emergency fund, which helped assure us that even if something really unfortunate were to have happened (like, both of us losing our jobs WHILE the market plummeted), we still would have had options.
Key to our plan? We practice dollar cost averaging, or investing on a regular schedule, whether the market is up or down. No trying to time the market over here! Some months it will be up, which is great, and some months it will be down, which is also great – we can get in at a discount :) Over the long-term, though, we believe the market will continue to go up.
I’ll end this post the same way I’ve ended previous ones: if you like the idea of trying something like this, I would highly recommend working with a financial advisor. Of course, it’s possible to make investment decisions on your own, but I don’t want to give you the impression that it’s just me over here knowing all the things and that you should be able to do the same — John IS a financial advisor, and if he weren’t, we would definitely be seeking expertise on decisions of such magnitude.
And finally, I know this is a bit more of a niche Marvelous Money topic than we usually cover, and perhaps it feels wildly out of reach for you right now. I get that. I share this not to brag (!!!) or make you feel defeated (hopefully you know that!), but to perhaps stretch your imagination of what’s possible. At the very least, I hope it encourages you to value the peace of mind that comes from living below your means, whatever that looks like for you.
A final reminder: I am not a financial professional, and nothing I say here should be construed as investment advice! I’m just one gal sharing her story :)
Let’s discuss! What questions does this post bring up for you? Anything we could discuss in a future Marvelous Money post?
