Automate it

Today I got home from work and felt it was time to update my wife and I’s monthly budget/balance sheet. It had been a few months and I knew that we had picked up some extra expenses since the last time we sat down and looked it over. I would encourage everybody to do this more often than not because it seems to always uncover some shocking results ( I like budget template #5 from this article: http://christianpf.com/10-free-household-budget-spreadsheets/ ). For instance, my wife and I found that we spent almost 20% of our income on groceries and eating out. That’s waaaaay more than we thought it was and for reference Dave Ramsey recommends 5-15%.

On a positive note, we also found that we have 18% of our income leftover for whatever we see fit. However, neither of us know where the money is currently going. We both feel like at the end of the month there might be a hundred bucks left. Our checking account doesn’t feel like it’s growing the way it should with all of those leftovers and I’ve come to the conclusion that it’s because we aren’t paying ourselves first. The Richest Man in Babylon tells us: “A part of all you earn is yours to keep”. Our problem is that, outside of our retirement funds, all of our income goes to our joint checking account and we pay all of our bills from that. We assumed that it would grow each month because we were¬†bringing in more than we were required to take out for bills….wrong. It seems that this method encourages thoughtless spending which has led to us falling short of our savings potential.

We decided today that we are going to start having a percentage auto-transferred to our savings accounts each paycheck. When the money for savings comes out first you don’t miss it because you never saw it in the first place. Neither of us feel the money being deducted for our retirement accounts and we get to see our balances steadily grow each month. I know it will be exactly the same for our savings. Make saving and investing automatic so you don’t miss the money and spending on frivolous items with the leftovers won’t make you feel so guilty.