It should be no surprise to anyone that the world we live in now in 2023 is drastically different form the world we knew in 2019 when Covid hit. With businesses shut down, workers going to remote work, employees being laid off and people hunkering down at home, it was only a matter of time before bank accounts suffered.
I personally witnessed friends and family members losing their jobs, losing their customers or even being paid less for working remotely than they were paid on-site. My friends in the service industries were hit hard because people weren’t going out to restaurants and bars anymore, and that “storm” lasted longer than most restaurants, bars and service workers were prepared to weather. With so many people experiencing job loss, and the difficulty of finding and getting a new job during Covid, our finances became more and more stressful.
In my immediate family, we were fortunate enough to retain our jobs while moving to 100% remote work, but we were the exception to the rule and we weren’t sure how long that scenario would last. With that in mind, we decided to get out ahead of the game and start to build a family budget.
What started as an exercise to hedge our Covid bets, ended up as a useful exercise in family budgeting. We launched into a family budget under the premise that we could both lose our jobs and income at any point, and we wanted to be prepared to weather that storm. This meant that our budget would be initially focused on savings and Covid-proof investments, but it also seemed like a great time to take on something more.
We’ve never had a family budget, because quite honestly it was a) complicated to do and b) controversial when you’re trying to decide what expenses are most critical. For decades it was simply easier to just wing it and stop spending when we ran out of money than it was to argue over things like tires being more important that organic groceries….but with the financial clarity that Covid brought to our household, we decided it was time to investigate budgeting and better short-term financial solutions.
I first investigated software solutions to see if there was a simple budgeting software package that would meet our needs. This seemed straightforward, but most everything I initially found was much more business-oriented than what we were looking for. It seemed obvious to use software, and as we did more research, this became even more important. You see, a budget is a working document. You may set a budget of $400 per moth for groceries, but that budget is only effective if you record your spending each time you buy groceries. You also have to agree on what “groceries” means and if that includes medicines, alcohol and other items that aren’t purely food. Since we were already tracking our spending in our checkbook / personal finance software, we decided it would be easier to use that software and only enter the spending once, rather than entering each expenditure in our checkbook software and then entering it a second time in the budget software.
This worked well because we were already doing the entry of expenses in our checkbook software. We started by breaking out our budget into broad categories and sub-categories. Categories like Housing included sub-categories like Electricity, Cable TV, Propane, Sewer, Garbage and more. We then used our previous expenditures to generate reasonable budget amounts for the year. There are some challenges because things like Electricity and Cable TV may be monthly amounts, but things like Sewer may be quarterly and things like Garbage fees may be yearly. After some debate, we decided that everything should be expressed in monthly amounts which meant dividing yearly and quarterly amounts into 12 monthly amounts. This made the budget playing field level for all categories and sub-categories.
With a budget goal of boosting our savings and retirement to insulate us from Covid job-loss, we moved the amounts we normally spent on dining out, visiting bars, attending concerts and doing other things that Covid had put on hold, into our savings. This actually felt pretty good and we celebrated that the $150 we would have spent each week on dining out was now going to go to our retirement….AND earning interest.
The process to agree on budget amounts will be a challenge for any relationship, but the rewards of knowing where your money is going and knowing that you’re more financially safe than you were 6-months ago should be ample reward for the hard work. We also used the budgeting process and the Covid lifestyle to re-examine our work/life balance. After three years of budgeting and Covid, we actually decided to allocate more money to insulate us from voluntary job-loss. In other words, we made financial room to change to jobs that offer better work/life balance opportunities if we felt the need.
You may be asking how this all worked out; and I’ll be the first to admit that budgeting is a moving target that requires continual adjustments. New categories need to be added and surprise expenses need to find a budget-able home. Difficult financial discussions need to be had and sometimes hard financial decisions need to be made. We set an initial goal of getting things 75% right and after a few years, I think about 85% of our budget is pretty solid with some work still to do on the other 15%. We’ve encountered surprise medical expenses but the budget has also given us the peace of mind to take surprise vacations as well.
In the end I strongly recommend a family budget, however, even if you don’t full implement a budget, I would strongly recommend at least tracking your spending. Without tracking expenses for a year or two, there simply isn’t a way to create meaningful budget amounts that are anything more than an educated guess. With years of expense tracking, we had a pretty good idea of what our budget should be. For example, knowing how much we had spent per month on groceries for the previous few years made our grocery budget one of the easiest to to agree on.
Your budgeting mileage may vary, but we found the experience to be liberating and I think we both sleep better at night knowing what our finances look like and being able to project what they’ll look like in the future. After all, while you can’t control Covid and it’s effect on the economy, you can control your own expenses and spending if you create a family budget.
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