I’ll never forget a conversation I had with an acquaintance many years ago. We had been talking about money and debt, and she said, “well, you have to have debt if you have three kids.” I didn’t really engage, but I remember being taken aback, if not completely surprised by the comment.
I’ve done a few things with my family that have left some people puzzled about our socioeconomic status. How can we afford to do all the travelling we do? We’re not rich by any means. We’re just good planners, and we happen not to care what other people think about our lifestyle. If you want to be able to afford those extra experiences you’ve been dreaming of, you’ll need too learn how to create a budget that works for you—and then stick to it.
How to Create a Budget and Stick to It: Save Up for What’s Important to You
When my husband and I took two months off for a road trip in the middle of a recession, we saved up for two years first, and then we travelled on a mostly shoestring budget. We spent the money on what was important to us.
When we took a couple of weeks to cycle 557 kilometers with our kids, we used our vacation days and the money we had set aside for vacation that year. And most recently, when we travelled for nine months with our kiddos in an RV, we had savings, we didn’t have debt, and one of us still worked on the road for a bit of income. We also rented our house back home, which helped.
Before I even get into how to create a budget, you should know one thing about our travels (and travelling in general): living on the road is a lot cheaper than living in a brick-and-mortar house, as long as you know where your money goes. Which is why you need a budget. The other reason you need a budget is so you can afford the things you want to do.
We’re not rich by Canadian standards. We live on mostly one income because we decided to homeschool our kids, and it’s easier for one of us to be home full-time to do that. We have a mortgage and responsibilities like most other adults. The reason we can afford to do the things we want to do is that we spend our money on what’s important to us—and we budget accordingly. If you want to afford extras, you’ll need to define what’s important to you, and put your money where your interests are (after you fulfill your financial obligations, of course).
Know your financial priorities
Dave Ramsey said that you should “stop spending money you don’t have, to buy things you don’t want, to impress people you don’t like.” Long before reading this bit of wisdom, we already knew we didn’t need to impress anyone with our “stuff.” We live life according to what’s important to our family. Some people may not agree that we’re doing it right, but they don’t get a say in our decisions; we do. We afford what matters to us by not buying “stuff” that doesn’t.
We buy old cars—travelling is more important to us than having a fancy car (we like looking at fancy cars, but we don’t need to own them). We buy almost everything second hand. We’re not afraid to decline outings that don’t fit within our budget.
If you want to stop living paycheque to paycheque and afford the extras you love (in our case, travel), the first thing you need to do is to set up a budget. Whether you make a lot or a little, assigning a job to every dollar will give you the confidence to save for a rainy day as well as for the nice things you want to do or have. How you set up a budget will differ for each person/family, but here’s the basics everyone needs:
Fixed Expenses are those things that you get a bill for every single month: rent/mortgage, electricity bills, water heater bills, heat, phone, etc. This should be the first thing you think about when you think budget. These expenses need to be covered before you set money aside for anything else.
Variable Expenses are those things you don’t get a bill for. Here you’d put groceries, clothing, fun money, etc.
While savings could technically go under variable expenses, I think it’s best to keep it in its own category, and make a conscious decision to put a set amount in here every month. In general terms, most people should have a minimum of 3 month’s worth of expenses set aside, though 6 months is better. If you’re an entrepreneur, 6 to 12 months is what you should aim for. This is also known as your “oh sh**” fund. If something bad happens, you know you’re covered for that amount of time.
Other Budget Categories and Sub-categories
Some people like to keep their budget as simple as possible and only have a few categories. I prefer to be more specific with my budget, so I can remember what I’ll be spending/have spent money on.
We keep two separate budgets: one for our family and one for my business. Today, I’ll tell you a bit about how we set up our family budget. We have categories and sub-categories, and Dan talked me down from the amount of categories I originally wanted. We still have quite a few, but I feel like this keeps us more organized and more intentional about where we put our money.
How we set up our budget
First, we create our categories and sub-categories on a Google Sheet. Here are our current categories.
|Fuel & Transportation|
|Gym & Sports|
|Family Spending $ & Entertainment|
|Stuff I forgot to budget for|
|Mariana Entertainment & Spending $|
|Mariana Sports & Fitness|
|Mariana Education & Hobbies|
|Homeschooling Materials & Curriculum|
|Homeschooling Field Trips & Events|
|Homeschooling Music Lessons|
|Homeschooling Art Lessons|
|Mortgage & Accommodations|
|Tax on Rental Income|
|Internet & Home Phone|
|Auto & Home Insurance|
|Auto & RV Maintenance|
|SAVING UP (RECURRING)|
|Kid1 Birthday Party|
|Kid2 Birthday Party|
|Kid3 Birthday Party|
|SAVING UP (ONE TIME)|
|QUALITY OF LIFE GOALS|
|JumpStart in Memory of Tim Stevenson|
Here’s a little info about our budget categories.
Under variable expenses, we put anything that we don’t get a bill for and that wouldn’t go under savings or donations.
Groceries is for food as well as personal care items such as shampoo, deodorant, etc.
Because we’re currently living in a building where we have to pay for laundry, we have a budget category for that. Once we move back into our house, where we have a washer and dryer, that category will come out of the budget.
Under medical, we put any prescriptions, over-the-counter medications, my joint braces, and complimentary medicine such as physiotherapy or massage therapy.
Fuel and transportation is for gasoline and commuter bus fares, etc.
Hair cuts are pretty self-explanatory, but since Dan started cutting his own hair, we don’t put much money in here.
Under gym and sports we put our family gym membership and the kids’ sport activities.
Restaurants is pretty self-explanatory.
Family spending money and entertainment is for anything not covered by other categories, and for putting money aside for outings together. I separate this category from restaurants so we’re more intentional about stopping at drive-throughs, etc. If restaurants is a separate category and there’s zero funds in there, we re-think the drive-through.
Clothing and gifts are pretty self-explanatory.
Stuff I forgot to budget for was a genius idea by my awesome husband. Basically, we put a bit of money in here every month, and if something happens that we forgot to set money aside for, like an outing with friends or someone’s milestone birthday, or something of the sort, we use the money in this category to cover it.
Dan and I have separate categories for our “fun money.” We each get a bit of “no questions asked” money to spend each month. Dan likes to keep his simple and just put everything under one category (“spending money”), but I prefer to separate mine so I’m more intentional about saving up for the things I want to do.
I created a homeschooling category and sub-categories so we can be intentional about setting money aside for homeschooling expenses, including field trips, materials, and specialty lessons.
The fixed expenses are pretty self-explanatory. Anything we get a monthly bill for goes under here.
Rainy Day Fund
This is one of the most important parts of your budget if you want to stop living paycheque to paycheque. Every month, put some money away for a rainy day. Under here we have our “rainy day” sub-category, should anything happen like a job loss. We also put our insurance under here, as well as home maintenance in case anything goes wrong with the house.
Saving Up (recurring)
Things that we have to save up for every year go under this category. That includes money for birthday parties, and saving up for the fall fair, an outing we really enjoy, but that can get expensive. Saving up intentionally for the fair means we can attend it guilt-free.
We also put vehicle and computer replacement under here. We don’t replace these every year, but we need to set money aside for these each month, so that when the time comes to replace them, we’ve got the funds.
Saving Up (one time)
I created this category for items that we decide we want to get but that were not in the budget originally. For example, we eventually want to buy a robot vaccuum, but those things are expensive. So when there’s a little room in the budget, we’ll intentionally start setting money aside to buy one, and the money we set aside will go under this category.
Quality of Life Goals
Under here, we put our long-term savings for retirement, education for the kids, and a yearly vacation (or money for more long-term adventures).
We don’t have a lot of debt, which is one of the reasons we can afford to travel. We do use a credit card and pay it off in full at the end of each month. We use a budgeting software that sees all credit card usage as debt (and rightly so), so even though all the money we use from the credit cards gets paid off each month, we still have a line in our budget for debt repayment. As we use our credit card, the software automatically takes money from the budget and places it into the repayment line.
Last but not least, we also set money aside to give away for things that are important to us. Each year, we donate to Jumpstart in memory of our friend Tim Stevenson, who was killed in a car accident in 2013. It’s hard to believe it’s been almost six years since it happened. We miss him. Donating to Jumpstart, an organization that was important to him, helps keep his memory alive for us.
We sponsor two girls through Plan International, so we make sure to set that money aside for that each month as well.
We’ve also made a donation for Dan’s cousin, Arya, a wonderful 4-year-old girl who unfortunately has been diagnosed with terminal brain cancer. Donating some funds means we can help them get to the United States for experimental treatment, since they’ve done everything they could do for her in Canada.
Finally, we set some money aside for the weekly church collections, and we put some money aside for other donations we might want to make that we have not thought about before (e.g. disaster relief, etc.)
There’s one thing we forgot to put into our budget that I’ll add later: babysitting. Adding a sole “babysitting” category into the budget means we’ll be more intentional about saving up for outings.
Too many categories?
We have a lot of categories in our budget, but being this intentional about every penny works for us. If a budget this long overwhelms you, you could do what many other people do, which is to simply have “fixed expenses” and its sub-categories, and put everything else under “variable expenses.” So, are you ready to create a budget that works for you? Good! But while creating a budget is an essential step, it’s not enough. You must assign money to each category.
Assigning a job for every dollar
After we’ve written down our current budget categories and sub-categories, we look at our monthly income and distribute funds. We recommend always distributing funds in fixed expenses first. What you put money into next will depend on what’s important to you, but putting money in savings as a second priority is usually a good idea. After that, you can choose whether donations or variable expenses will be prioritized.
We input the amount of money for each category into the spreadsheet we created. Then, each month, we work from this spreadsheet to distribute funds into YNAB—the budgeting software we have been using for a few years and that we highly recommend.
Budgeting software saves the day
Once our funds are distributed, we make sure we look at the budget before making purchases. If there’s no money in that category, we must move money from another category or simply not make the purchase. Once we’ve bought something, we input it into YNAB, which automatically deducts that money from that category. Using this software, we always know how much money we’re spending and how much money we have left to spend.
YNAB also gives you reports, which come in really handy when tax time arrives. You just have to be sure to save your receipts, whether physically or virtually.
Take control of your money so your money doesn’t control you
The best thing we’ve ever done for our finances was to create a budget and try to stick to it as much as we can. Having a budget helps us stay out of debt, save for a rainy day, and still be able to pay for the things we like, such as adventure travel with our kids. It also gives us the confidence to say “it’s not in our budget” when our kids ask for impossibly expensive gifts or we’re asked to do things we shouldn’t do if we want to be able to afford what matters to us.
Do you have a budget?
I’m starting (perhaps a wee bit late) to prep our homeschool lessons for the upcoming school year. First things first: I must remember to send our letter of intent this year. Second things second, I like creating my own curriculum, as that was my favourite thing when I was still a school teacher. Creating lesson plans is definitely part of the fun of teaching for me. I figured I might as well share my curriculum with you guys! This year, I’m doing a “home economics” curriculum, and one of its main features will be teaching kids about money management.