How We Use Our Budget to Maximize Travel & Spend Intentionally

Note: This article is about how we have created our family budget and how it has impacted us specifically. If you want a less personal, step-by-step guide for YOU, then check out this article about How To Create a Budget. There is some overlap between the two, but this one includes more of our personal thoughts and reflections.

Why our budget is so important

“Behaviors are an insight into our priorities and our values.” I rattle this off multiple times a week when advising students who say their grades are the most important thing but spend 75% of their day scrolling through Facebook and 1% studying. This also rings true for me, though, and helps guide my choices. Reflecting frequently helps to make sure how I spend my time and my money matches up with what I say I care about. When we don’t reflect on it, then we waste money on unnecessary things, cause ourselves undue stress, and often miss out on what makes us most happy. Spending is not bad and buying quality things is usually a good decision, however being intentional about where we are spending has allowed us to match our expenditures with what we care about: being financially responsible, always having money to support people who need it, and enjoying the things we love: our family, friends, sports fandom, and traveling (to beautiful places like Puerto Rico, pictured above from a trip we took in 2016).

The story of our finances and the birth of our budget

When our kids moved in, we had never budgeted before in any significant way. Sarah and I were splitting bills, but mainly managing our own paychecks and carrying our own stress about it. I had no credit card debt and only around $1000 in savings since I had used most of my savings to replace an old car of Sarah’s a few months earlier. We had been married for almost a year and I had little knowledge of Sarah’s money. She had less in savings and had gained about $2000 in credit card debt from our last vacation, and then the kids moving in before she had paid off her flights. We were not in a bad place financially, but also not moving towards a good place in any intentional way. Oh yeah, we had just bought a house and adopted two dogs as well.

Even though I had been in a decent place financially, I had been stressing forever about every purchase I made, always telling myself that any money spent was unnecessary and too much. This was true for things I just wanted, but it was also true for necessities like groceries or cleaning supplies or oil changes. I was worried I would end up with a credit card bill higher than what I was making after the normal monthly expenses.

Let me repeat this: I lived in full-time stress over this, even though this wasn’t usually happening and I was saving quite a bit each month (enough to make down payments on a car and a house within 4 months of each other).

However, I didn’t even realize that. I was not looking at my finances regularly in any big picture way. This was a feeling that was only exaggerated when the kids moved in. We made the decision with our heart, but felt like we were logical about it, too. However, somehow the specifics around affording it was not discussed. We said, “I think we can afford it because I always have some excess money in my account when we need to make a big purchases.”

Two and a half months into being a family of 6 humans and 2 dogs, this had to be figured out before my stress was unbearable. Sarah and I sat down one day, opened a spreadsheet, and the budget was born.

The steps we took to create our budget

1. We created a spreadsheet. We use Google Docs so that we can always have access to it. Originally we used Excel, but my laptop was stolen and we had to start from scratch.

2. We looked in our bank accounts and figured out how much we make in a month. Then looked in our bank accounts because the only money we are concerned with is what we have to spend.  No sense worrying about the amount we made before taxes and health insurance and retirement contributions or whatever else is taken from our paycheck. That is already allotted to a need. We put that total on a calculator to subtract from it as we added new items to the budget.

3. We found all recurring monthly expenses and labeled them across the top. Then we put the amount of those payments below them. Examples are Mortgage/Rent, Student Loans, Cable, Car Payments, Dog Food, Car Insurance, and any other monthly subscriptions. For some we had to choose if it would be its own category or if it would be taken from somewhere else. For example, Hulu may have its own category because everyone in the house uses it, but my Pandora subscription comes out of my money each month because only I use it. This also helped us discover some subscriptions we forgot about and get rid of ones we felt we didn’t need. After we added them to the spreadsheet, we subtracted it from the calculator.

4. We researched our utility and grocery spending. For utilities we found our most expensive month for each category and listed that in the budget. This prepared us for when we hit the highest in each category all in the same month, and gives us some extra unused cash for when we might have an unexpectedly high month in a different category. For groceries we tallied up each of the last several months and found an average, but you could also go with the highest month. We did the same for car expenses, then added these categories to the spreadsheet and subtracted the amounts from our totals.

We were done with the absolute necessities of what we had already committed to spend at that point. Thankfully our calculator was not in the negatives. Next we moved onto the extra things we cared about and how we wanted to prioritize them.

5. We reflected on what we care about and what is most important. For us the list goes something like this: savings (because this provides a safety net for everything), kids (most of their expenses are accounted for in the groceries category though), paying off debt (cars and student loans), travel, house maintenance, eating out, soda trips, and everything else (which includes any type of shopping, going out, all forms of entertainment, gym membership, haircuts, etc.).

6. We created an “emergency/random expenses” category. There seem to always be items that don’t fit perfectly. The thing that killed us the first go around was any gift we had to buy for someone. We would usually take it out of one of our miscellaneous categories based on who the relationship was with, but we felt it made buying gifts for people you love feel like a burden or sacrifice. So now the “emergency/random expenses” category relieves us of feeling that way.

7. We split up the rest of the money. The decision was based on how much was left, how our remaining monthly income would be allocated. We subtracted from the calculator total as we went. Through it all, we had to be honest and realistic. I can pretend that I can go the whole month without buying anything, but that isn’t realistic. I need to get haircuts, I may lose my phone charger, I will probably go out with friends, I might just really want a cool book. If we can limit these excess expenses, that’s fantastic. But we couldn’t, and shouldn’t, limit all of them. I have $150 in my miscellaneous spending each month and it allows me to avoid excesses, but also not stress every time I need to spend money. I know it is there and that lets me off the hook when I find something I want or replace something I need. An overestimate is always better than lying and putting us in a hole every month, but we made sure it was low enough that we would be intentional about our spending.

8. We decided where the extra money goes. Whatever was left over from our monthly income gets split among savings, paying off cars or student loans, and travel savings.

How we track our spending

• About every week or two I sit down and record our spending. If I wait more than two weeks it is usually too overwhelming and we forget what some of the purchases were for  (especially if we bought anything with cash). I list down the column the amount of each purchase that falls in that category, and have the sum totalling at the bottom.                                          
• We always track our spending by using our credit cards, both because there is a record of where the money was spent and because this maximizes travel rewards. This also helps me remember to pay off my credit card regularly and never keep a balance for too long. Credit card rewards are only worthwhile if you aren’t paying interest. So I keep purchases in red until I pay them off the credit card, then I change it to black.
• We transfer savings and travel savings to a different bank account. I wait until the month has finished to do this, as it prevents me from overdrafting accounts when paying off credit cards. Having a different savings account for regular savings and travel gives me extra motivation because I can see the numbers clearly adding up over time.

How we handle overspending in certain categories

• First, we go over somewhere every month. I find a category that was light that month and take from there (for example, the gas bill column in the summer).
• Second option is to take it from the travel savings. This is another reason why I always wait until the end of the month to transfer it. This is the hardest thing that I ever need to do with the budget, which is one way I motivate us to spend responsibly.
• Third option is to take it from that month’s savings. For overspending, I never go into our savings that have already been transferred. That money is locked away mentally for us.
• Fourth and final option is to track it in the following month. It sucks to already use up that money before you even start, but occasionally it comes to that.

How has it worked for us?

We didn’t have much money left over to be saving at first. It took patience and intentionality to slowly build up to where we are now. Getting raises each year helps. Paying off loans helps. And when that happened, the key for us was not changing our spending habits. We have had a similar budget for the past four years now. We have bigger salaries than before and we have paid off two car loans. This has freed up more money, but that doesn’t mean we need to spend it each month. Each year we discuss if there are areas that need tweaking. This year we increased the dog budget because Libby is on expensive medication and it was decimating our emergency money each month. When we got raises, the money went there first, and then the rest towards paying more on our car loan each month. This allowed us to pay off one loan entirely, then we added that amount to our other car loan to pay that one off too. By reflecting and being intentional about how our budget aligns with the things we actually care about (i.e. the kids and travel over miscellaneous spending or eating out), we have been able to reach a place where our finances aren’t so stressful and we can spend in the ways that creates opportunities for us to be most happy.