How we Budget

We have always tracked every single penny with a household budget. And when I say every single penny, I mean every. single. penny. We’ve had the odd remark over the years from friends about how crazy we are to track so closely when we’ve discussed how we all manage household finances. But it works for us and that’s what matters.

Where we Started

The very first LLC budget started in 2003 when Mr. LLC started university. And it was a gloriously simple budget!

I also think it was a bit different from a traditional household budget. Mr. LLC knew how much money he had for the year – a combination of his savings from his part time work and his student loan. He listed all his categories (tuition, rent, book money, food money, spending money) in the budget and put £ amounts next to these categories.

The budget ran from September-June (term times at university) and the aim was to be at £0 on the last day of term in June. Inevitably more spending occurred September-December on evening outs, book purchases and accommodation costs. However, I used to marvel at his ingenuity and stubbornness of refusing to go into his student account overdraft by pretty much living on potatoes and pasta for sustenance for the last term of the year!

Over the summers, Mr. LLC would work and his wages would cover his summer spending and provide savings for the coming university year.

Mr. LLC made me the same budget for when I started university – and I loved it! Thanks to his Excel skills, if I needed to move money from one category to another or update an amount (if I’d overspent or underspent), it would automatically recalculate all the other numbers in the spreadsheet to take me back to £0 at the end of term.

Managing finances as a student is challenging but I’m happy we discovered our frugal sides early in life to ensure we left university with nothing owing but our student loans.

Evolution of a Budget

We moved in together in February 2007 when I was in my second year of university, so our budget changed then to become a household budget.

I will preface this by saying that Mr. LLC has a background in finance and also enjoys honing his Excel skills as a hobby. So, our budget is in a constant state of improvement and refinement.

It has also gone from being quite labour intensive to update to a breeze, as you’ll see in my mini evolution below. However, even though the budget has gone through many iterations, the basis is still the same – we input every purchase and make sure the budget is balanced at the end of every month.

Initially, we saved all receipts and manually entered the amounts into an excel spreadsheet. Each receipt was attached to a budget category and we then checked the budget against our current account/credit cards to make sure it all balanced.

The first evolution of our budget was the building of an Access database and a rudimentary form to input receipts. This was a mixture of using Access and Excel.

The next iteration was a transition over to Google Sheets. This was a huge transition as it meant we could access it anywhere and not need to necessarily be at our computer to work on it or check something. The next huge (and most impressive I think) step was the creation of a budget entry Google form.

Our DIY budget entry form

Another great thing Mr LLC has been able to do with the move over to Google sheets is to create things like the budget summary you see below. This was pretty much born out of me constantly asking to see how much we’d spent on a certain category throughout the month.

January’s budget summary showing spending in the most popular household categories

Mr. LLC asked me what categories I’d most like to see and created this quick glance guide that we keep on Google Drive. We have on there the most popular categories where we have historically spent the most discretionary money.

I used to keep a running tally of how much I’d spent on food shopping for the month on my phone but now I just quickly check the budget summary and it gives me the most up to date spending on a category.

Mint was added into the mix when we moved Stateside to track our spending. We use it to easily check all of our accounts to make sure the budget is balanced. This type of thing is only available to an extent in the UK (OnTrees and Money Dashboard for example). However, their functionality is pretty limited to what the US version can do because of UK data protection and privacy laws. It’s definitely something we’ll miss when we leave America.

We’ve just gone through another mini evolution and I think this one will be here to stay for a while. We now use a mix of Google Sheets and Excel. Google sheets finds it hard to cope with a full year of budget data. So, Mr. LLC wrote a Macro that pulls the transaction data monthly into Excel and then we’re just left in Google sheets with the opening balances on all the accounts for the start of the month.

Everyone budgets differently. Or not all (*shocked face*). For some, it’s just writing down in a notepad your income for the month and what your projected outgoings will be. For others (like us), it’s a combination of tracking our monthly spending and creating longer term yearly budgets.

Of course there are times where we’ve let things slide and ended up with a month’s worth of receipts to enter and sort out. However, moving the budget into Google Sheets and creating the budget entry Google form has been a real game changer. Now, I can enter transactions as I go on my phone and the introduction of Mint has always reduced our time spent logging onto every account/credit card we have to balance the budget against each account.

Changes Ahead?

Perhaps I shouldn’t admit, after a whole post talking about our budget, that we’ve recently contemplated doing away with it altogether?!

OK, OK. We wouldn’t necessarily ditch it altogether. But what we are thinking of is a move away from budgeting so heavily to just tracking what we spend. At the moment we affix a £ (or $ at the moment) amount next to a category. In the past, this created frustration for me a lot of the time when we overspent in a category as I felt like I’d failed for the month (overachiever much?).  

Now, since starting our journey to become financially independent, we’ve adapted our approach to money. Even though we allocate ourselves some money each month doesn’t necessarily mean we’ll be spending that. We live with the approach of spending as little as possible and being more mindful of the way we spend our money. I think this naturally leads us to simply tracking what we spend rather than budgeting for what we will spend.

Some Advice

What I’d say to someone with no previous budgeting experience is to start off a bit more labour intensive like us

  • Know what money you have coming in each month (wages, tax credits, benefits, other income)
  • List mandatory expenses for the month
  • List discretionary expenses for the month
  • Put £ amounts next to each category
  • Record your spending
  • Check against your bank/credit card accounts to ensure the budget is balanced
  • Rinse and repeat the following month

Doing this for a few months would help you to see where you’re spending your money and how much you’re spending. You soon get a handle on the rough monthly expenses for certain categories which means you’re more confident in your spending because you a) know how much you roughly have to spend and b) know how much you have already spent as the month goes on.

Doing this for a year then gives you the data to know when certain purchases come out so you can begin to budget for them ahead of time. Things like birthdays, annual insurance premiums, car MOTs and Christmas occur every year but these are the sorts of expenses that can catch someone out and have them scrabbling to find £700 when they need a new handbrake and clutch for their car at the MOT.

It can take time and effort to get a handle on and build confidence in managing your household budget. However, once you do have a handle on it, it can strip away so much stress and frustration and allow you to focus your attention on other pursuits that take your fancy!

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