how we budget: an overview of our budgeting tools & tips

many of you have asked for details on how we live within our means & stick to a budget. today on the blog, my husband is sharing the details of how we budget & tools for creating your own unique family budget, too! 

currently, we live on one full-time salary & my small business. luke is the manager of our home finances & i am so thankful for his leadership to responsibly manage what we have right now! i hope you can gain some tangible tools from his knowledge!

Through years of trial and error, falling off the horse and getting back on again, Natalie and I have developed a budget system that works for us. We know that each family requires their own systems to fit their own specific needs, and this is not a one-size-fits-all. But we hope you are able to glean some good tips and craft a budget system that’s a perfect fit for your own family!

We currently use a combination of tools to stay within our budget. Our three tools are:
- Excel spreadsheets
 - Cash budgeting
- Online transaction tracking

 It might sound a little complicated at first, but today I am going to explain just how we use these tools...

1. Our Excel Spreadsheets

This is where my inner geek shines through. I love Excel spreadsheets, but I realize that most of you probably don’t share that love (if you don’t like Excel, you could probably find an alternative). This component is vital to our budgeting and financial management.

We use spreadsheets to predict our upcoming spending for the month, and then to track our actual spending at the end of the month. It allows us to sit down together, look at our anticipated income, list out bills, extra expenses, and savings goals… and see if it all adds up. If not, we can do some tweaking and adjusting so that we know we won’t be spending more than we are bringing in.

Here are the categories we use for our budget spreadsheets:

1. Income
2. Bills
3. Cash budget
4. Extras
5. Savings goals
6.Net Income (should be greater than 0) = Income – bills – cash budget – extras – savings

I’m able to create functions in Excel to do the math for me and make it very easy – just plug and play. But those of you who aren’t so inclined could just do the math by hand in a budgeting notebook.

Please note that our Excel file and budget change from month to month. We know what our basic expenses are each month, but we have a bit of wiggle room to adjust categories in anticipation of additional expenses.

2. Our Cash Budget

We used to do a cash budget for almost everything, but we’ve moved away from that. Now we only do the cash budget system for categories that we are likely to overspend and we need a hard limit on.

The categories we use the cash budget system for are:

1. Groceries
2. Home supplies
3. Allowance
4. Date night
5. Gifts

For these categories we choose a set amount at the beginning of the month and withdraw the money in cash from the bank. The money then gets divided out into envelopes (Natalie uses her miss moneybags wallet specifically for this), and whenever we spend on that certain category we’ll use the cash out of the envelope. We can visually see the money decreasing in the envelopes, and when the cash is gone we know we’ve met our budget limit—without any guessing or adding up receipts.

The allowance category may sound silly, but it has actually been very important and healthy for Natalie and me. This allows us each to have our own spending money to use on whatever we want without having to talk to the other person about it. Coffee dates, books, beer… whatever. And we each get the same amount, so it’s fair.

You may get to the point when you don’t need to do the cash system for a category anymore and can just regulate the amount you put on a credit or debit card. That’s fine. Natalie has gotten to the point where she knows how much she can spend at the grocery store (and will actually add up the total price as she puts items into her cart), so we have recently moved away from doing the cash system for groceries and are now tracking online.

3. Online Transaction Tracking

This sounds complicated, but it simply refers to checking the bank account online or using an app to track purchases. We use for this because it is free and user-friendly. Also, Mint has apps for smart phones and tablets, so you can use the service on multiple platforms. I have come to love their iPad app.

Online Transaction tracking allows us to track our spending in the categories we set in our budget spreadsheet that we use our debit card on. I try to get on the computer and categorize our transactions at least twice a month to stay on top of where we are with the budget. Mint will actually show you in real time your current spending compared to your budget limit, and send you text messages when you’ve overspent. Some people solely use this kind of app for their budgeting, but it works better for us to do a hybrid approach.

So the role Mint plays for us is to allow us to accurately tally up our spending at the end of the month and compare it to our goals we set at the beginning of the month. If we overspent on a category like clothing, we may have under spent in a category like pet supplies to compensate, or we may have to take out of our savings goals (worst case scenario).

In summary our budget system allow us to:

1. Make accurate predictions on anticipated spending for the upcoming month to ensure we are not living beyond our means
2. Stay on track during the month so that we are staying within the limitations we have set for ourselves
3. Set savings goals and follow through with those goals by depositing money into savings at the end of the month
4. Minimize stress by giving us the assurance that we can meet our needs and put back money for the future

We hope you’re able to glean something from learning about how we budget. The most important thing is to understanding that a budget is there to serve you and give you the freedom to live without financial stress, by allowing you to live within your means and plan for the future.
- Luke

i'd love to read any tips or tools you use when budgeting your home finances! 


Sarah Dolislager said...

Thanks for sharing! We do almost all of the same things, except we no longer do online tracking because I just balance the budget once a week. Other than surprise expenses (like car trouble and dental procedures), it's worked for us! It's nice to hear it come from someone else... Affirmation that we're on the right track. Also, excel is the bomb.


Lauren said...

Would you be willing to share your excel spreadsheets?? I'd love to see the functions/formulas you use, as well as your layout. I've created one for myself but it's not that great :/ I'm new to excel!

Jill said...

I love all things Elizabeth Warren, including the 50-30-20 Budget she developed with her daughter awhile back. It has given Bill and me a lot of freedom from tedious accounting systems. We have our savings on autopilot (and we've been lucky to save more than the recommended 20 percent). We keep our needs below the 50% mark to compensate for extra savings. The rest of the money is for fun! This has really helped our relationship, since someone in the household...ahem...can get a bit miserly. That would be me, and I'm in charge of finances. Grinch be gone!!


The 50-30-20 budget divides up your after-tax income, or net pay, into three categories. Essentially, your paycheck is portioned out as follows:

50 percent for needs: Needs include any expenses you cannot forgo in a given month, like your rent, groceries, and minimum payments on credit cards, mortgages, and auto loans.
30 percent for wants: This might be about the most surprising part of the Elizabeth Warren’s budgeting rule, as a greater portion of your income is allotted to “extras” like going out to dinner or a concert.
20 percent for savings and debt: Interestingly, for many first-time 50-30-20 budgeters, saving money and paying down debt — which so many personal finance experts emphasize as a priority — takes the smallest portion of the cake. In addition to growing savings for an emergency fund and retirement, this section also includes extra payments toward debt.

R Dhad said...

Thank you so much for this. It was really informative and I am going to use your tips to create a budget for myself. I've been going through some financial difficulties lately and had no clue where to start. This came at the perfect moment. Thank you!

Beth said...

I would also love to see your excel spreadsheet! Just a blank one would do; no money amounts, just the categories, etc.
Thanks for sharing so much of your lives with us!

Beth said...

I'm setting up my system and am wondering....
Where does thrift shopping/yard saling fit in? Do you have a separate envelope for that? Or do you use whatever envelope may correspond to what you are purchasing? {For example, a lamp would come out of the household envelope, etc.}

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