SO Jeremy posted a blog about this, and spoke about it on the radio, and I think its garnered a lot of interest, so I decided to blog about it too.
We have inflicted a state of broke on ourselves.
We decided to put our spending and lifestyle on a diet. We have goals, we have plans, and we dont get any closer to them flittering money away on junk.
We are getting married, we have actually picked the date and place. November 10, 2009, Puerto Vallarta. I have ring expectations, no denying that. And bottom line is, the way we spend our money, I dont get my honking rock.
We want Madelyn to have a good upbringing, and dont want to worry about being able to afford things, for her or her future sibling(s).
We want to go places, own a home with a yard, invest in our lives.
Enter: The jar budget.
So, you sit down, maybe with excel, because lets face it, I love me some excel spreadsheets, and you put it all down on paper.
First, your total household income, after the tax man, before ‘life’. You can do it separately, but it was easiest in our situation, in a two income household, to put ALL the money that comes in, because it saves having to break down ‘mine and yours’.
From that total you subtract what I refer to as you A PAYMENTS. This is the MUST list. YOur mortgage or rent, your hydro bill, cable, internet, phone, life insurance, loans. The bills.
Ok, now after those are all subtracted from your income, you have a new total.
From this total you deduct your B PAYMENTS. THis is the perks list, and it can contain anything you feel you need to have and pay for every month. Ours? Entertainment, the gym, Baby, Groceries, Clothes/Gifts and Gas.
(Now we can argue that groceries and baby should be on the A payments list, because they are non-negotiable, but in our case it was easier for us to make A payments solely bills – dont worry though, the baby obviously gets diapers and we obviously eat.)
Here’s the key, you take out ALL the B PAYMENTS in cash, divvy it up and store it in the labeled jars.
LIVE. ON. THIS. CASH. ONLY.
(Obviously barring any emergency)
What makes this ‘diet’ work is creating a false sence of ‘broke’. When the money in your entertainment fund is out? Well, no more movies til next month. Tough luck. You have to be strict.
The beauty? YOu can do it on any income level, and living in a cash only world allows you to build some form of savings. The money left over after all A and B PAYMENTS are out is savings. Its gravy.
In our case its diamond rings. Its vacations. Its debt free living.
Thats our goal. Opperate debt free. And we will. We just have to be frugal now. We set our bar and our goals, and we will get there.
Of course issues may arise, emergencies or WEMUSTHAVETHISNOW’s, and the money will be there, but until that time we have to pretend its not. We HAVE to, or we are constantly swimming in a circle and living paycheque to paycheque.
I think the beauty of this budget is that it CAN be adapted to anyone. You change your jar lables, you change the figures, and you MAKE yourself live within the cash flow.
Maybe the key is getting out of this ‘plastic world’ mindset we all put ourselves in. Its convinient, yes, but is it worth it?