“Nearly 40% of those ages 23 to 38 admit to fighting about finances at least once a week.”
I never wanted money to be a stressor in my personal life or my love life. I grew up seeing money as a major sore point between my parents, and I just didn’t want that for myself. I convinced myself that whoever I chose to marry would have to be on the same financial page as me, and we’d be fine.
Fast forward to 2020. Oscar and I got married and decided to start figuring out how to manage our finances together as a married couple. We’d had financial discussions before, and we’d talked about our financial goals and habits and blah blah blah. But nothing prepared me for when we actually had to get down to brass taxes and start putting together what we were going to do, how we would manage our family’s finances, and (what I thought the most important thing in the world was) how we would budget.
Fast forward again to 2024; my husband still to this day will not use a budget. He hates them. He hates the idea. He even hates that technically, even though he refuses to call it that, we do still have a budget. Because you have to have a budget to build wealth and financial freedom. Make sure you read to the end of this article because we’re going to talk about budgeting for finance nerds (like me) and real tips for people who hate budgeting (like my husband).
A quick disclaimer: All of the information here is according to my own finances and what has worked for me for the past 13 years. Your financial needs and priorities might be different based on your own finances. And remember, this is a blog to learn about financial information. I am not your financial advisor and cannot guarantee any financial results. There also might be affiliate links on this page, but I will NEVER recommend anything that I do not personally use and love.
3 Common Types of Budgets
The 50/30/20 Rule
This type of budgeting system divides your after-tax income into three sections. Your needs are 50%. Your wants are 30%. And your savings/ debt repayments are 20%. This type of budget is pushed by old-school finance people like Elizabeth Warren. Ultimately, it is actually to help you adjust your lifestyle to how much money you really make (and avoid getting into debt over things you can’t afford or becoming “house/car-poor”).
The Zero-based Budget
This type of budgeting means that every dollar you get after taxes has a “purpose.” It sounds a little funny, but it just means that you know where every single dollar that you take home goes. The important thing about this budget is that eventually, you decide how you want your money to be spent, down to the last dollar. It can be empowering, but some people also find it overwhelming.
The Envelope System
This type of budgeting system breaks your money into different categories. You have a set amount of money in each category that you can spend however you want to, but you cannot spend more than you have in that category. You can’t move money between categories to make up for deficits, either. Most people use actual cash and actual envelopes, but you can also do this digitally by having different accounts for each category. People tend to find this one helpful if they are bad at sticking to budgets or are new to budgeting.
I’ve Decided On a Type of Budget, Now What?
When I was single and managing my own personal finances, I preferred the zero-based budget. I didn’t make nearly enough money to stick to a 50-30-20 Rule (my housing was easily 70-80% of my income), and I didn’t spend money consistently enough on most things to put them into categories (I bought clothes once a year during Black Friday super sales). I also love spreadsheets! However, married Kathleen and married Oscar have done a lot of trial and error over the years to create a mash-up of different budgeting styles that now works for us.
Step 1: Track your finances for at least a month (maybe 3) to see where your money is currently going.
Most people forget this really important step when they decide to start their budgeting adventures. That is a huge mistake. You need to see, with no rose-colored glasses or slights of hand, what you are really, currently using your money for. The truth about budgeting is that you don’t have to live like those crazy penny-pinchers on TV. But you do need to see what is or isn’t working for you.
Step 2: Decide on priorities and write those into your budget.
You don’t have to give up traveling or eating out with your friends just because you are on a budget. If travel is important to you, your budget needs to reflect that. Otherwise, you are going to throw in the towel within a couple of months. Or just be the saddest person on the planet. My priority was savings (yeah, I know that’s lame!). But I really needed financial security when Oscar and I first got married, and savings were a way for me to gain that. Oscar’s priorities were eating good food and being happy. He’s a simple man. Our joint priority was travel (and now, we’ve added having a house we love and our son).
Priorities become your non-negotiables. And by having these, you feel like you are still enjoying your life.
Step 3: Pay Yourself First
Even if savings is not a normal priority for you like it was for me, it needs to become one. Before you can really have full freedom in your budget and money, you need to address some elephants. Do you have debt? Do you have an emergency fund? Are you saving for your future?
If you have “bad” debt, you need to pay this off ASAP! If you aren’t sure what bad debt is, I’ll explain this in more detail later in our Finance for Beginners Series. For right now, let’s focus on debt with a high interest rate (looking at you, Credit Cards). The TDLR is that a high interest rate on your debt will cost you a ton of money in the long run. You really can’t build wealth with this type of debt.
If you don’t have a $1,000 emergency fund in a high-yield savings account, this should actually be priority #1. A lot of financial gurus, like Dave Ramsey, tell you to get this emergency fund first before you pay off debt. Let me show you why. Your car breaks down unexpectedly. You take it to a trusted mechanic whom you know will give you a fair price. It ended up being $400. You don’t have any extra money, so you put it on your credit card. You will NEVER pay off a credit card you keep having to use.
Saving for the future is how you actually build wealth. A higher down-payment on a car gets you a lower interest rate, saving you thousands of dollars. Buying a house gives you equity, earning you (tens of) thousands of dollars. Saving for retirement now gives you time to build compound interest, earning you (hundreds of) thousands of dollars. Not everyone can afford to save $100 every month for the future, but time is actually the best asset here (not money). Just $50 dollars a month in a high-yield savings account earns you $12.92 in one year. BUT in 10 years, it earns you $1,358.81!
Step 4: Decide what to do with the rest of your money.
This is really where you decide what to cut and what to keep that is not a priority. Some things, like groceries or rent, you might not be able to change much. However, small decisions can lead to potentially big financial changes. You will have to keep track of this somehow to keep yourself accountable!
Remember, you are free to change your budget at any time! Change the type of budget, or amount in different categories, or when you pay off debt or save up enough in your emergency fund, decide how you want to use the money not going to that every month now! Just make sure you keep your priorities front and center when you make any decisions. This will keep you on track.
What Does This Look Like??
Like I said in the beginning, I’m going to talk you through what this process looks like for people like me and for people like Oscar.
Step 1: Track your finances for at least a month (maybe 3) to see where your money is currently going.
I actually do this by going back through the past couple of months and writing down everything that’s been spent on a monthly calendar. When we first created our budget, I went through my bank accounts, and Oscar went through his, and then we looked at the calendars at the end. We totalled up how much was being spent versus how much was actually coming in through income. This picture is an example of what it looks like in the end but isn’t our real numbers.
Step 2: Decide on priorities and write those into your budget.
When I was single, my priorities were to not go into debt (college and credit cards) and to start saving for the future. What that meant was that I had next to nothing left for “fun.” I worked my butt off during that part of my life because my priorities were for my future. That didn’t mean I didn’t have fun, but it did mean that sometimes I had to get creative (cooking together at my friend’s apartment instead of going out to eat).
When Oscar and I got married and we made a list of our priorities, we wanted to respect each other’s vision for a good life. Our non-negotiables helped us to understand what a good life looked like for each other. I would be perfectly happy never going out to eat if it meant I could retire 5 years earlier. Oscar wanted to be able to enjoy the life he’s currently living instead of squirreling away for some distant future. We both prioritized freedom. We just had different ideas of what that looked like.
Actually, deciding how these priorities fit into our budget happened in steps 3 and 4 for us, since we were working this out together.
Step 3: Pay Yourself First
When we were looking at our finances, we actually decided that we wanted to try something kind of crazy to see how it worked. We decided to live off of Oscar’s paycheck and use mine to “pay ourselves first.” When we first got married, my paycheck went to a Roth IRA, Emergency Fund, Wedding Reception Sinking Fund, Travel Sinking Fund, and “extra.” (If you haven’t read the Finance For Beginners post about savings accounts, you can get there through here.) Oscar’s paycheck was all bills, fun day-to-day expenses, and incidentals. The idea was that we could live without my paycheck if we needed or wanted to. This also worked really well for paying ourselves first because the money going into those savings accounts was (and still is) automatically pulled at the beginning of the month, right after I get paid.
Now, we still use my paycheck mostly for “paying ourselves first,” but I also pay for our truck payment, and our sinking funds have changed. All other necessary and unnecessary life expenses still come from Oscar’s paycheck.
Step 4: Decide what to do with the rest of your money.
Since using my paycheck for future savings solved my priorities, we needed to figure out how to solve Oscar’s priorities with the rest of the budget.
The first thing we tried right after we got married was to set restrictive amounts in many different categories (groceries can only be $120 a week, or eating out can only be $20 a week). That did not work. Then we tried action-based budgeting (eating at home 5 times a week for dinner or eating out for lunch only twice a week). That didn’t work either. When we tried doing very broad, easy-to-stick-to strategies, it actually started working.
Now, his paycheck is divided into categories (like the envelope system, except we only have two categories and the “envelopes” are separate bank accounts). Absolutely all necessities are in one account. We call this the bills account, but it includes anything that we need: utilities, insurance, subscriptions, and bills. All wants come from the second account, the fun money account. This one has a set amount of money, and no money can be transferred into it. The only way this account gets more money is if Oscar’s paycheck rolls around. This turns “extra” spending into a simple flowchart (you can see it in the picture here).
You Gotta Start Somewhere
I know that budgeting feels limiting and restricting, but I hope you see that it doesn’t have to be. All budgets do is give you a way to show what your priorities are with your money. Will you have to make some changes? Yes, probably. As much as Oscar would love to eat lunch out with his co-workers every day of the week, he can’t. But he can more frequently than once a week if that’s something he’s prioritizing. I would love to go backpacking through Europe, and I might one day, but right now, our travel budget allows us to go see amazing places here in the U.S. at least once a year.
You just have to start somewhere, take a leap of faith, change what you don’t like, and figure out what you do. If you want a little guidance with tracking your current expenses, you can download this free monthly expenses tracker here!
Continue learning with the next post in our Finance for Beginners Series coming soon. This one’s about investing!
If you would like to see a tutorial about how to set up a budget or you have any questions, please comment below! We’d love to hear from you!
