Saturday, April 19, 2008

Baggy Budget 101

I kid you not, our first big fight came a week after we got married. I decided to buy tampons bulk at Sam’s Club. Hubby had no idea tampons cost so much money. A few days later, Hubby pulled into a gas station just to buy a soda and a candy bar. How dare he tell me I couldn’t save money on bulk tampons and then waste money on soda at a gas station? How dare he!! Did he not care about me at all?!?!?!?

The truth? We both had basic needs, but had no idea about the other's basic needs and the costs associated with those needs. I never mentioned the cost of tampons while we dated. I never considered that the cost of tampons would be paramount to happily ever after.

We had to get our needs on paper for the other to see. When we saw them on paper and the associated cost, they no longer threw us for a loop. I could see his concern that three months worth of tampons might mean he couldn’t get the oil changed the next day, (but once the oil was changed, hey, why not buy soda and candy?) Once basic needs landed on both radar screens, fights ended before they began. This system of putting needs on paper and knowing where and when your money needs to be spent is called a budget. People have apparently been using it for millennia. We just happened to catch on right after we got married.

We also both came into the marriage with a set of wants and dreams. I love expensive ice cream. He loves good running shoes. We both love adventure travel. Our wants needed to be put on paper, too- all of them. We couldn’t afford them, but they still needed to be on paper. Once we could see them all, we could prioritize our wants and decide what to save for and what to sacrifice. We decided to make deep cuts in our spending, but we also decided to save for the ski vacation we took two years later. As we sacrificed individually, personal pity parties ended when we looked at the other's wants and what they were willing to sacrifice. Yes, I may be eating bargain vanilla, but he’s wearing no-name running shoes. How do you say, “I love you?” Thank each other for sacrifices made.

After we had all of our basic necessities and frivolities on paper, we divided our money into purchase categories. Money was alloted to each category. For instance, tampons came from the "Toiletries" category. Zip Lock baggies came from the "Household Maintenance" category since they were about to help us maintain our new household.

In order for us to wrap our minds around spending money in certain categories and tracking our spending, we had to make our budget into a baggy budget. At payday, we paid tithe, rent, electric, and debts with big checks. Then we divided our remaining money into Zip-Lock baggies, literally. We had so much money in each bag for food, eating out, clothing, toiletries, etc. The money went out and the receipt for the purchase went right back in. We had to make the money in each bag cover our needs in that category until the next payday. If I wanted tampons bulk, I could buy tampons bulk, but I’d have to wait and buy make-up the next month. Hubby knew he had money in the bag for oil changes and brake fluid. If he pulled into a gas station for soda and a candy bar, I knew that the money came from our “Eating Out” baggy and not my “Toiletries” baggy. Eventually, he stopped pulling into the gas station for soda because he wanted to save the "Eating Out" money for someplace more enjoyable.

After a year of the Baggy Budget, we learned to trust each other and spend based on the categories. Now we no longer need the baggies because we have spending habits in place. We’ve gone back to a check book and keep it balanced. All of our reciepts are still tracked on paper, however, down to the last penny.

FOr more info on budgets, check out our get out of debt Guru, the wise one, Dave Ramsey:

Also check out:

How To Manage Your Money By Larry Burkett

The Catholic Answer's Guide To Family Finances by Phillip Lenahan

The Budget Kit by Judy Lawrence

The Personal Budgeting Kit by Silvia S. Lim

The Everything Budgeting Book By Tere Drenth

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