Cha, cha, cha, changes!
I use YNAB to manage our budget. I've decided to make some changes. A new paycheck, a new plan to manage the funds and the goals.
YNAB for us is broken down into fixed expenses, variable expenses, rainy day funds (which I should change to short term savings) and savings goals.
Fixed expenses are rent, allowance for one daughter, vision insurance, internet and streaming services (all budgeted for the first of the month), life insurance, Roth IRA investment contributions, and our cell phone service (the latter budgeted on the 15th). The big switch for this budget is that we are paying our full rent on the 3rd. In the past we have budgeted half the rent out of each paycheck, paying it on the 16th. Our rent is actually due in arrears, so one month after it is posted. I've never liked this! We were always paying ahead, by a couple weeks. Now we are paying on time, at least in my world!
I won't list all of our variable categories, but imagine fuel, household, groceries, ect. I have often gone off of what we spent in the previous month to fill in the budget. I was often moving money from one category to another because I wasn't exactly accurate with the budget. Using last years spending data, I found variable expenses to be on average $1060 every two weeks. Now, I drop the full budget amount into the top category of groceries at each pay period. As we spend and categorize other variable spending during the pay period, I simply move money from groceries to cover that expense. I have only done this for one month, but we had an excess of funds in the variable category at the end of each pay period. We put that amount in to the Pot of Possibilities (POP)
In order to change our rent payment to the beginning of the month, I will budget our short term savings goals from the paycheck that arrives on the 15th of the month. Short term savings, are sinking funds for things like college tuition, auto/renters insurance, vacation, and car maintenance. I made myself notes, it was often not clear which categories I should fund with each paycheck. I did make it work, but this is easier. I love simplicity! I drop about $1400 worth of cash into these sinking funds, that generally deplete themselves in a years time.
And finally, our savings goals. The two categories are the emergency fund and the Pot of Possibilities. We do have a specific emergency fund, but in this budget I drop $250 per paycheck to act a bit as a slush fund or buffer if needed. It is not often needed, but mentally I like having this money here to pull from rather than dipping into the POP or other emergency savings in other accounts. And basically anything that isn't allocated to the other categories each paycheck go to the Pot of Possibilities! Last month we saved over $3900. As of February 1, we dropped another $1031 into the pot.
A lot of words to explain what feels like a simplified way to budget. I'm no longer dividing the rent and the sinking funds over two pay periods. They each get their own. I'm using an average amount to budget for variable expenses each pay period, and putting the extra in the POP at the end of the pay period. I have a clear plan on how to manage savings, which prioritizes contributing the maximum amount to the POP!
It's only February, but I'll let you know how it works as the months continue! Have you made changes to how you budget?
