I’ve spent some time this week thinking over our monthly household budget. One additional benefit from completing and living off a zero based budget is that I can pull back and see what we are prioritizing in our lives. I firmly believe that if you look at someone’s budget you can tell a lot about them. Dreams, goals and priorities all stand out when examining one’s budget. Below is a list of a few of our generalized budgeting items that I want to focus on today. Percentages are based on our net income and are not inclusive of every “category” on our budget, which is why these items do not equal to 100%.
*Saving: 60% (does not include pre-tax savings going into our 401k)
Saving and Housing
The two heaviest hitters on our monthly budget are saving and housing. When it comes to saving we prioritize retirement, saving to buy our first home and saving to travel as our most important goals for the future. Time is a huge factor for us when it comes to saving. Within our retirement vehicles and our taxable brokerage account we are investing a set dollar amount every month so that we can be on the receiving end in regards to the power of compound interest. When the mathematical explosion that is compound interest occurs for us in the decades to come we plan to get our time back. The end result being that our investment income will earn more than our working income and we can retire from the 9 to 5 jobs to pursue our dreams of: living and travelling abroad, regularly volunteering, seeing family more often, just to name a few.
On the housing front we have made a conscious effort to keep this percentage figure well below 25%. In the coming years when we have children we want to have the flexibility to be able to choose if my wife will be a stay at home mom for the first years of parenthood. While we are planning to move from our current apartment when our lease is up in the spring (hopefully for a place with a bit more space and even lower rent), we can keep our housing costs within reason of our monthly take home pay on one salary.
Food, clothing and recreation
When it comes to these categories some terms that immediately come to mind for me include planning, ingenuity and thinking outside of the box. Now percentage wise we don’t give ourselves a ton of wiggle room in each area but to be perfectly honest whenever we have assessed whether to raise any one of these categories we always come back to the same question: Would we really get joy and fulfillment from an increase in spending on any of these things?
My wife is a master seamstress and she can whip any piece of clothing that I find at Salvation Army into shape. We are pros when it comes to grocery shopping and meal planning, plus we keep this cost down by consuming less meat and more fruits and vegetables (plus I hear that’s good for me anyway). When it comes to recreation, we’ve gotten pretty adept at finding events and enjoying the city of Chicago without busting the budget.
It’s not that I don’t enjoy a good meal, some nice clothes and a night out on the town. Believe me, I do. But I get a greater joy out of planning to send my kids to college debt free and being on a mission to pay cash for our first home. At the end of the day when assessing my means and opportunity cost, the budget priority breakdown is really a no brainer.