My wife and I maintain a family budget. Yes, we actually sit down once a month and talk about what we think our expenses might look like next month. There are various categories such as Clothing, Groceries, Mortgage, Fuel, etc. Some of these are pretty predictable: our Groceries expenses only vary 1-2% from month to month. Other categories are hard to predict, like Car repairs: We normally don’t know of any upcoming repairs being needed, but we expect that something will crop up eventually. So we have been putting a small amount into that every month.
This works well for us: A short while ago, some electronics started acting up and we knew: uh oh, this problem is going to cost a few hundred to fix. How fortunate that we have nearly a thousand set aside for things like this: we could just pay the bill without hesitation and without having to shuffle money around and without getting stressed about where to take it from!
The only catch? This was not simply “fortunate” but rather it was deliberately budgeted based on probabilities and average expenses in the past. That’s not rocket science but still something that doesn’t occur to most of us automatically.
We use a clever (and simple and fun) budget program called You Need A Budget* (YNAB) that has turned our thinking about money upside down. YNAB features an unusual approach to budgeting money, and it’s amazingly effective. I’ll probably write more about this in coming posts. There’s a 34-day free trial (and they’re cool about giving trial extensions) and students get it for free.