budget Archives — Beating Broke

How a Pay Cut Has Affected Our Finances

July 13, 2020 By MelissaB Leave a Comment

The pandemic has hit many people financially. While millions of people have lost their jobs, there are also millions who have taken a pay cut. Our family is very grateful that my husband has both kept his job and been able to work from home the majority of the time. However, he did experience a significant reduction in salary.

How a Pay Cut Has Affected Our Finances

Essentially, my husband’s pay cut brought his salary back to where it was six years ago. When we found out the pay cut was coming, we immediately took action.

Practice an Attitude of Gratitude

Before I even set to work altering our budget to adjust to the new income level, I practiced an attitude of gratitude. Yes, having a pay cut will make managing our money a bit more difficult, but my husband still has a job. That job, together with my freelance work, still provides enough money to support our family. The job still provides us with health care benefits and money in our retirement accounts.

This mind set helped me start to tackle the new budget and think of it as a challenge rather than a struggle. Even with less money coming in, we’re still in a good position. That alone is much to be thankful for.

Eliminate Extras from the Budget

Next, I looked at the subscriptions that we have. I had an eight dollar a month subscription to an exercise site. Sure, it’s not much per month, but I really didn’t need that subscription. I’ve found plenty of work outs for free on YouTube.

I also had a subscription to a foreign language app for another $7.99 a month. I deleted that and instead signed up for Duolingo, which is free.

We had about six monthly subscriptions in our budget, and we cut about half of them.

Find Corners to Cut

After I eliminated the easy fat from the budget, I set to work finding corners to cut.

Reduce the Grocery Budget

How a Pay Cut Has Affected Our Finances — Photo by Maria Lin Kim on Unsplash

I had raised our grocery budget in March when it was hard to find groceries in the early days of the pandemic. Now, I cut that back. I also changed the meals that we eat. Instead of having meat at every single dinner, I’ve instituted a two-night-a-week vegetarian meal. For the other nights, I try to mostly pick meals where meat serves as a condiment rather than the main star. For instance, we’ve enjoyed bean soup with one slice of bacon crumbled on top per bowl. By doing this, we’ve found some new recipes we really enjoy.

Reduce Other Budget Categories

We used to have a travel fund line item in our budget. That one is now gone. Not only is it difficult to travel safely with the pandemic, but we simply don’t have the money to travel now.

Likewise, we had a spend category for my husband’s interests and mine as well as activities we did with the kids. I didn’t want to eliminate that one entirely, but I eliminated it by about 75%.

Increase Some Budget Categories

As strange as it seems, while I was slashing budget categories, I also found a few that I thought prudent to increase.

Emergency Fund

Despite the budget cut, I still make emergency fund savings a priority. Even though our money is tight, life still goes on. Over the next few months, we will likely need a car repair. We’ve already had an $800 home repair during the first few months of the pandemic. We will likely need to see the doctor or buy medicine.

I want to continue to save for emergencies and recurring, irregular expenses. If I slash those categories to make our budget a bit more comfortable, then when the expense pops up, we’ll have no way to pay it. That would cause us to go into debt, which we both want to avoid at all costs.

Kids’ Allowance

This may sound strange, but I chose to increase our kids’ allowance. We have always had our kids’ allowance directly tied to the chores that they do. Since we’re home so much now thanks to the pandemic, I increased the number of chores that they do. (Our house gets much messier when we are in it 24-7.)

Why did I increase their allowance when money is tight? Simple. Now, they have their own money and their own budget. For instance, my daughter wanted to buy some paints, a paint-by-number kit, and some yarn to keep herself busy with crafts. She used to ask me for those items, but now that she has a larger allowance, she will pay for those items herself. Now, I don’t have to be the bad guy saying we don’t have money for the items. Instead, she (and our other kids) get to pick and choose what they want to buy and what is most important to them. They’re in control, not me.

Ramp Up Other Work

As soon as we learned about his upcoming pay cut, I set about increasing my work. My husband’s income provides about 80% our monthly income. While increasing my work load won’t make up for the decrease in his salary, it does make up for a bit. An increase in my work load makes the budget a little less restricting.

Find Other Safety Nets

I mentioned to our financial planner that my husband was getting a pay cut. He let me know that for the year 2020 only, I could withdraw from our retirement account without facing the typical 10% penalty IF our pay was cut or we got COVID-19.

I don’t plan on using this option, but I do appreciate knowing that the option is available should we desperately need it.

Final Thoughts

How a pay cut has affected our finances is pretty dramatic. However, we’re still financially sound. We’ve taken the important steps to continue to live within our means and weather this storm. Most of all, we’re grateful that he still has a job and that he has the flexibility to work from home.

What the Pandemic Has Taught Me About Our Spending

June 22, 2020 By MelissaB 1 Comment

The pandemic has changed our American way of life. More people work from home now. Kids go online to complete their schooling. Many of us are wearing masks now. And, our month or two quarantined at home has given us time to reflect on what are life used to be like. . .and whether or not we want to fully go back to that life. I’ve spent some time considering what the pandemic has taught me about our spending.

What the Pandemic Has Taught Me About Our Spending

Sometimes you get complacent in life and just do things the way that you’ve always done them. This pandemic has allowed me to look at our finances with fresh eyes to discover what we did well and what needs improvement.

My Bargain Shopping Was a Boon to the Family

What The Pandemic Has Taught Me About Our Spending — Photo by gemma on Unsplash

I used to drop by the grocery store three or four times a week, scouring the store for clearance mark downs. I bought probably 1/3 to ½ of our weekly food this way. I used to worry that I was spending too much money shopping this way, but now I see how much I was really saving us.

Since the pandemic, I’ve relied on grocery store pick up, which means paying full price for everything. Our grocery bill has shot up by 30%. When the pandemic is over, you can bet I’ll be back to stopping by the store a few times a week to pick up the bargains.

We Drove Around Way Too Much

Before the pandemic, we were a busy family with three kids. We spent our time, like many American families, in the car driving from activity to activity. Gas was a large line item in our budget, especially since our town is very spread out. We easily spent 2 to 2.5 hours in the car a day, dropping off and picking up a child from school, taking another child to therapy, going to horseback riding lessons, gymnastics lessons, religious education lessons. On and on.

Since the pandemic, our gas consumption has dropped to nearly nothing. I’ve bought gas for my vehicle twice in three months; my husband hasn’t had to buy gas at all. We find we’re happier with more time at home. Whenever things are more normal, we don’t plan to be as busy, which means less gas consumption.

Our Emergency Fund Is Not Large Enough

We’ve been working on building our emergency fund from a tiny $1,000 to a six-month emergency fund. When the pandemic hit in mid-March, we had a two-month emergency fund. While that’s certainly better than a $1,000 emergency fund, I really wish it was larger.

We’re lucky that my husband was able to keep his job and work from home, but he did get a pay cut. While we have rearranged the budget to accommodate the pay cut, we won’t be able to grow our emergency fund like we had previously. And, depending on the way this pandemic rides out, we’re both aware that he could lose his job next year. I’d feel much more confident if we had a bigger cushion.

Final Thoughts

These three are what the pandemic has taught me about our spending. I’m quite sure when this pandemic is over, our family won’t go back to the way things were. I think we’ll drive a little less and try to save even more.

How has the pandemic changed the way you look at and spend money?

How to Create a Zero-Based Budget in Excel

April 27, 2020 By MelissaB Leave a Comment

Whether you feel like your finances are a mess and you don’t know where the money goes every month, or you want a better handle on your spending and saving records, I highly recommend keeping a monthly budget. I know, I know, people always complain that they don’t want to keep a budget, or that their finances are too complicated for a budget. The simple truth is, once you learn how to create a zero-based budget in Excel, keeping a budget is quite easy. And if you’re short on cash, that’s all the more reason why you should keep a budget.

Why Keep a Budget?

A budget can be helpful at the beginning of the month to act as a map. This map tells you how much you have to spend and save and helps direct how you use your money.

At the end of the month, when you fill in what you spent, the budget serves as a financial journal, so to speak. I find it very helpful at the end of the year to see how much I spent on groceries, miscellaneous, etc. That helps me make next year’s budget. Also, if my savings is smaller than I would like, looking over past expenditures helps me see what was the cause.

Why Use Excel?

There are so many budgeting software programs out there. Why not use one of them? Well, you certainly can, but I’ve discovered that most of them charge a monthly or yearly fee. I don’t know about you, but I find it irritating to pay $5 to $8 a month just to have a platform for maintaining my budget. However, after you initially buy Excel, it’s completely free! And, once you learn how to use Excel, it’s easy to use.

Sure, you could keep your budget on paper, and I did that when my husband and I were first married. However, as finances get more complicated, a paper budget is harder to maintain. It’s also harder to evaluate your spending at the end of the year because you can’t organize it by categories and expenditures.

What Is a Zero-Based Budget?

A zero-based budget simply means that each paycheck, you plan expenditures that are equally to your income. So, if you create your budget, and you discover you have an extra $200, you don’t just leave it sitting there. (Most people will slowly pitter away that money during the month.) Instead, you earmark that extra money for something. Maybe it goes to your emergency fund. Maybe it goes to debt repayment. The point is, you give that money a job so you don’t spend it because you see it as “extra.”

How to Create a Zero-Based Budget in Excel

Creating a zero-based budget in Excel is fairly easy and quick.

Create Categories First

When you start your budget, you’ll want to have several categories. These categories will run vertically down your Excel column.

Categories to Add to The Budget

The first column should have several major categories:

Income
Fixed Expenses
Variable Expenses
Debt

These categories represent your income and all expenses for the month.

Fixed expenses will be those expenses that are the same month after month. Think rent or mortgage, cable & internet, etc.

Variable expenses will be those expenses that vary every month such as gas, groceries, spending, utilities, etc.

Debt will obviously include all of your debt such as credit card payments, student loan payments, car payments, etc.

By now your Excel spreadsheet should contain two columns. The first should be the broad categories of income, debt, fixed expenses and variable expenses.

The next column should contain the names of all of those particular expenses.

Get Ready to Record Data

After that, you should have two new category headings, each in their own column—Budgeted and Actual.

At the beginning of the month (or pay period), you will put in the budgeted amount you plan to use for each category.

As you incur expenses, you will put the actual spending under the “Actual” column heading.

Customize to Your Choosing

At this point, you can customize how you would like. Some people focus on the aesthetics and make each column a different color.

Some people budget for the entire month, while other people budget for each paycheck in the month, whether that be four or five for a weekly paycheck or two paychecks for a bimonthly payment. You decide what works best for you.

Keep in mind, if you look in Excel, you don’t need to create such a simplified budget. Excel has plenty of budget templates already designed for you such as this:

What If You Don’t Know How to Use Excel?

What if you’re convinced you need a budget, but you are intimidated because you don’t know how to use Excel? No worries.

There are plenty of free online tutorials that can teach you how to use Excel. If you’re a visual person, check out YouTube tutorials. If you prefer online websites that explain how to use Excel, there are plenty of those, too.

For the most part, learning how to create a zero-based budget in Excel only requires the most remedial Excel knowledge.

The only tricky part is that in some places in your budget, you will likely want to add a calculation formula. For instance, if you have a category for “Emergency Fund” and at the end of the month you want the $400 you saved this month to be combined with the $600 you saved last month, you’ll need a calculation formula. Again, this is easy to learn in less than two minutes through a video like the one below:

Final Thoughts

Learning how to create a zero-based budget in Excel will be worth your time! Once you have the budget set up, you can create a plan for your spending and also track how you spent your money at the end of the month. When you have a clear view of how you’re spending your money, you’ll be able to have more control of your money. As a result, your financial situation should improve.