Do what you can, with what you have, from where you are.Ben Bergeron
Welcome to a new year! Hopefully you’ve found your groove with your kiddos after the break and the year is rolling along.
February is one of my least favorite months. All of the holiday lights are gone and my runs are just icy and cold. But February is also one of my most favorite months because it’s when we take a look at our goals and plan our financial year. Here’s why: my January paycheck reflects the amount I’ll be bringing home each month for the coming year. It includes any changes that started in the fall (my National Board stipend, union dues, raise if I’m lucky) AND any changes to my health insurance premiums, HSA and 457 contribution amounts. It’s the first month that I actually know what I’ve got to work with for the year. Since I get paid at the end of January, February is the time when we sit down and look at our budget from the previous year, talk about what our goals are for the coming year, and plan accordingly. (If your pay schedule is different you can still do all of the things in this post–just do it in the first month of the year that you know your baseline take-home pay.)
Before we dig in, I cannot stress this enough: It is SO important to know how much money you’re making and how much money you’re spending; the goal being to spend less than you make and put the rest towards debt and saving. That is the motivation behind our budgeting plan every year.
Also, there are apps that you can use to help you with this process, but David and I have found it easiest to just stay with our old-school paper-pencil system for keeping track of things. Mint and YNAB are the two apps I’ve heard the best reviews about. You can read more about them here.
Ok, here goes! First we total our monthly income. David’s fluctuates a bit so we just use an average for him, and we use my January check amount for the reasons listed above.
Then we add up our expenses. I do this by saving all of our receipts and totaling up what we spend each month. I’m sure that sounds crazy to some people, but it’s actually really quick and easy and I can put every expense in the exact category I want. I have a page for each month in a three-ring binder so I can easily see what we’ve spent in every category for the year. Each February we look at the previous year and decide to spend more or less in the flexible categories based on our goals. Click the button below to get the google doc that I use. See the comments for an explanation of how I use it, then feel free to make a copy and change it up so it works for you! I’m joining the 21st century this year and trying a spreadsheet for the first time, so click on that if you prefer a high-tech and fancy version!
Then monthly income minus expenses gives me a good target for what we should have left over each month. That money then goes directly into making extra mortgage payments, maxing out our retirement accounts, and building our emergency fund. We also put that money towards sinking funds. Sinking funds are a way of saving for expenses that happen periodically, but not monthly. We put a little bit aside each month for future spends like vacation, property taxes, and car maintenance. (Also, appliance replacement…new washer and dryer, anyone? Yep, that was us this year.) That’s it! One hour on a Sunday in early February sets us up for a year of intentional financial decisions that will literally build the present and the future that we want.
Now wait a minute. It’s not that easy, you say. Well, it is and it isn’t. The nuts and bolts of it are just basic math and finding an organization system that works for you. Easy. But if you’re anything like me, you might have to work through a wee bit of emotional resistance before you can start. Not so easy. There were many, many years that I wrote everything down while wincing like I was about to get a shot in the arm. I didn’t want to look, but I knew that I had to if we wanted to take control of our future.
This I can say for certain: if you make yourself a plan and develop a system that works for you and start right now, you will be amazed at what you can build for yourself. You and your family deserve the small amount of time and attention that it takes to build a solid financial foundation. And no matter your income or how much debt you have, square one is knowing what you’re working with.
I’ve been there, and I know you can do it. This can be a really exciting, motivating time in which you set your course for so much of your life. If you’d like some help, I’m here. Just give me a call or shoot me an email!
Did you find this post helpful? Be sure to subscribe so you don’t miss the next one! Have a teacher friend that would love some help setting up a budget? I’d love it if you’d share this article with them. You can also find me on Instagram @financiallyfitteacher and in our Facebook group: Financially Fit Teachers.