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Happy 2018, everyone! The first week of the year is always exciting for me, because it’s when my husband and I set up our annual plan for our money. Some might call it a budget, but it goes beyond that. Planning for the year ahead gives me a chance to experience:

Part of our process involves reviewing the previous year and how we used our money. We get to look back on all of the things we experienced, accomplished, built or contributed to, and it always makes me feel grateful for where I am. The biggest highlight of 2017 was our trip to Africa. We planned ahead, saved our money, and used it well on this trip. It was really an example of what’s possible when you are wholly committed to identifying and honoring your values. I’m infinitely grateful that we got to have the experience we did, without going into debt.

Once we know what the previous year looked like and what our baseline is for the year ahead, we can start to get excited for all of the cool things we have planned! This year we have three weddings and a trip to Iceland planned, and I can’t wait! We create line items in the budget for these major “one off” expenses, so our savings are never at risk and we never incur debt. More on that later in this post!

I have yet to create a flawless, perfect budget that works for the entire year. It’s important, in my opinion, to give yourself some wiggle room when it comes to planning out your year with your money. Unexpected things will come up! They always do. We’re only six days in and I’ve already identified an expense that I didn’t plan for a week ago. I’ve decided to get a tattoo in honor of my brother. We don’t have a line item for it in the budget – womp womp – so that gives me the opportunity to figure out how to carve out some money for that without compromising our aggressive savings targets (we’re projecting to save 66% of our combined income this year). My solution (drumroll, please) is to actually eat the random food in our pantry that we never seem to utilize. That will minimize our grocery bill for the month, create some much-needed space in the pantry, and voila, tattoo money is secured. We track our expenses meticulously, so I’ll be able to very clearly determine how my grocery hacking contingency plan is working out 🙂

If you’re new to creating an annual plan, I recommend starting with the mindset of gratitude, excitement and opportunity. This puts a whole different spin on how to approach your finances for the year – looking forward to what’s ahead and honoring your values without compromising your financial wellbeing.

Now, to get to the nitty gritty! Alex and I track everything on our own, and it’s fun for us. Yep, fun! And yep, I completely get that that’s not normal. If you’re not into maintaining your own spreadsheets for tracking your money and planning ahead, you might want to check out Cinch. I previously reviewed Cinch here, it’s free for 90 days, and about $5/month after that if you want to stick with it! Takes a lot of the legwork out of it. Whether or not you choose to use Cinch, your own spreadsheet, or some other plan entirely, you’re still going to want to understand and categorize your cashflow. This helps you to quickly identify areas where you could carve out money for an unplanned expense (like a tattoo, or whatever you’re into), and over time will forge you into a money ninja who can anticipate and respond to every financial challenge!

To help get you started, I’m sharing the categories we use for our household. Everyone’s budget is going to be different, so consider this a general outline. The only way to really create a plan that works for you is to understand your spending habits. I recommend looking at credit card and bank statements for at least 3 months of history to get a sense of where your money goes! If you’re feeling really ambitious, you can do a whole year (which, by the way, is a lot easier once you get in the habit of tracking things as they occur). There are certain things that only pop up once a year, so if you’re only looking a few months back, you might forget about it. Then all the sudden your Amazon Prime renewal hits and you forgot it was coming, so you’re stuck with eating the boring food in your pantry for a while.

Anyway, here’s how we categorize our money, and some tips on how to streamline!

How much we have coming in after maxing out our 401(k)’s, paying taxes and health insurance. When we got married we chose to live on only one income and save and invest the entirety of the other, and that has worked out really well. It wasn’t an easy transition, but definitely worthwhile now that we’ve been at it for a few years! 401(k) contribution limits for 2018 are $18,500 for participants under 50 years old. For those who will be 50 or older by year-end, an additional $6,000 “catch-up” contribution is permitted.

We make biweekly mortgage payments and round up a little, which takes years off our mortgage. Instead of making a monthly mortgage payment, that amount is divided in half and paid to the lender every two weeks. At the end of 52 weeks, you will have made 26 smaller payments amounting to essentially 13 months of mortgage payments over a 12-month period. If you can get your lender to apply the payment biweekly, even better, because the overall interest charges end up being much lower! Unfortunately a lot of lenders won’t allow it, because the interest payments are how they make money. Can’t hurt to ask though! If that’s not an option, still at least set up biweekly payments and consider rounding up your payments a bit. It seriously adds up over time, and a mortgage is a long-term commitment. If you decide to make extra payments on your own, you’ll likely need to contact your lender to make sure extra payments you send are applied to the principle balance only rather than any interest accumulated. Each lender will have its own process for accepting extra payments, so just contact them to find out what you need to do. If you rent rather than own, consider forecasting for increases in rental rates if applicable.

We live in a community that has a Homeowner’s Association so we plan for that expense each year. HOA’s can be tricky because depending on what’s covered and who’s in charge of planning and budgeting, you can be hit with steep “assessments” which are lump-sum charges on top of the monthly recurring fee, to help cover something major outside of the normal operating expenses (like roof repairs or siding replacements if they’re not accrued for). If a community is mismanaged, it can be a nightmare for families trying to plan their finances, and home values can take a hit if communities aren’t maintained well. Fortunately property values in our community continue to rise, and we’re happy with the way our money is being leveraged. Our HOA fees went up the year after we moved in, and now they’re back down. Each year they reassess, so we just have to adapt to the changes as we go! Make sure you read the HOA bylaws and all of the performance history of a building, unit or community before investing in a property with an HOA.

Pretty straightforward – we eat a lot of plants which keeps health points up and cost points down! We cook most of our meals at home and we’re also big fans of when our moms bring us food every time they visit (Hi Mom! Hi Diane!). We don’t budget separately for household supplies, so our grocery budget also covers things like toiletries, trash bags, cleaning supplies, etc.

Date night! Every once in a while I like to get dressed up and go out, but usually by the end of the week I’m so tired that the ideal date night involves take-out and wine at home. If we do go out, we usually use gift cards from cashing in credit card points. We also tend to favor BYOB options because Alex brews his own beer and it’s really good, so we can enjoy a nice night out without paying a huge upcharge for alcohol! We pay for dates once or twice a month, and the budget is pretty minimal.

This includes meals out with friends, different events we might want to participate in, or anything, well, social! Last year we actually didn’t have a “social” line item in the budget and I was just kind of moving money around from other areas to accommodate these outings. Usually the “Dates” budget took the hit, and I wanted to go with a different strategy for 2018. That’s another important thing to note – your priorities and therefore your budget will change so it’s important to keep checking in with yourself to determine what’s working, what isn’t, and what you might want to do differently.

All of our anticipated health costs for the year are covered by our Health Savings Accounts, but sometimes unexpected things pop up! I like to accrue a little extra each month to make sure we’re covered if there’s a sinus infection or a trip to urgent care or something. Last year we had a completely unexpected ambulance trip that crushed through an entire year’s worth of HSA savings. I don’t expect that to happen again, but it’s good to have a little buffer. It’s okay to call ahead of an appointment and get cost estimates before going in. This helps you plan for it and once you get the hang of it you can start to include anticipated costs in your annual budget. If your employer offers a Health Savings Account, the contribution limit for 2018 is $3,450 for an individual or $6,900 for a family. If you’re 55+, you can contribute an extra $1,000 on top of the standard limit. This is a tax-free account you can use to pay for approved medical expenses – check the documentation for your particular account to make sure you know what’s allowed! We use our personal credit cards for these bills and then request reimbursement from our HSA. That way we earn the credit card points and still have tax-advantaged spending on healthcare.

Each year we assess what gym equipment and fitness classes we want to invest in. I have a membership to a pretty nice gym, but to be honest, I don’t go as often as I should to make it worth what I pay. So when it comes time to renew in April, I’m just going to transition to buying class passes so I can keep going to my favorite ones. I have a home gym and our community also has a gym, so there’s really no need for me to have a separate gym membership. I really enjoy certain group classes though so it’s important to me to plan for the cost of participating in those! You don’t have to give up everything you love to save money, just as you don’t have to pay for things you don’t use. For our home gym this year we bought pull-up assistance bands (for me), a weight belt (basically the opposite of pull-up assistance bands – for Alex), and kettlebells. Thrilling stuff, I know 🙂

Cell phones
We’re on the same cell phone plan and have a discount through Alex’s employer, which is nice! We used to buy new phones every two years when our contract was up, but here’s an insider tip: you don’t need a new phone every time your provider says you’re eligible for one. You still have to pay for that phone in most cases, and they’ll smooth talk you into upgrading by rolling the payments into your service contract, so it seems like it doesn’t really cost anything. We bought two new iPhone 6’s in November 2014 and they still work fine. We got suckered into the “upgrade” and realized we were paying $50/month for the phones for 2.5 years, which was longer than our contract even was – ugh! Never again. You can also take a look at how much data you’re actually using, and adjust your plan if it makes sense. Call your service provider and ask them to help you figure out ways to lower your bill. They have always been really helpful when we’ve done that, and we call all of our service providers annually to ask for discounts and extra ways to save. They’re motivated to keep you as a customer so will usually work with you. Since most places have free WiFi at this point, you don’t really need to use a lot of data to stream shows or surf the internet.

Gas and car maintenance
We own both of our cars outright, and we take good care of them. Alex has a fuel-efficient 2012 Honda Accord Coupe and I have a 2014 Jeep Wrangler Unlimited. We plan ahead for fuel for regular commuting, registration and inspection, and oil changes, since we generally know what those cost. We do our own repairs and upkeep when we can (like light bulbs and wiper blades), but sometimes if my car’s going into the shop anyway I’ll ask them to put wiper blades on for me so I don’t have to do it. By planning ahead, we know we’re covered if the cars need repairs, and we don’t have to dig into our savings. If anything happens above and beyond normal wear and tear, we’ll tap into the emergency fund. Then the top priority is to replenish the emergency fund before resuming regular spending habits!

We have two lab mixes, Tamale and Ace, that we rescued at the Atlanta Humane Society in 2011 and 2012 respectively. Beyond obvious expenses like food, treats and toys, we plan for their annual vet check-ups and accrue a bit extra for emergencies. In 2016 Tamale sneezed blood everywhere and a $600 trip to the animal hospital later, we learned she had dog allergies and dry nostrils. In 2017 we discovered she had tumors in her bladder and needed surgery that cost thousands of dollars. She’s totally fine now, and I’m really really glad we save money so that decisions like that are not an issue financially. We don’t have pet insurance, but rather just plan very conservatively for pet-related expenses, and expect that we’ll be better off financially with that approach. It’s possible pet insurance might make sense in some cases, but so many things are not covered that it didn’t seem right for us. I personally prefer to plan and save myself, and keep a robust emergency fund in place.





Tamale working on her fitness in our home gym, and Ace begging for bagels

Nothing too exciting to report here – just our water bill that we pay monthly for being connected to the city supply!

We actually save thousands of dollars per year on our electric bill by keeping the house chillier in winter and warmer in the summer. We keep the house at 62 degrees Fahrenheit in the winter (we do turn it up when we host company though because we get that that’s kind of cold) but we just wear sweatshirts and we’re totally used to it at this point. Our electricity bill as a result is extremely low compared to other households. I’d rather wear a sweatshirt in the winter and go on a cool vacation than heat an entire house to excess in frigid weather. We’ll realize even more savings down the line when we upgrade our appliances and replace our windows! Nothing needs to be upgraded yet, so for the time being we have 1.5 years of electricity data for our house, so I can plan pretty accurately.

This is billed quarterly and snuck up on me when we first moved in, so now I know to accrue for it monthly and then the cash is ready to go when we get the bill!

Our Netflix cost went up by $1 this year! Totally blew the budget. Just kidding, but since we don’t have cable or traditional television, Netflix is one of our key lazy person entertainment sources. I just finished watching Schitt’s Creek and legitimately laughed out loud at many points – check it out!

We call our internet provider each year and ask for more discounts – and they always give them to us! So we’re saving $30 extra each month for the next two years because Alex made a quick phone call in December. I’m sure there are cheaper providers, but uninterrupted service is more important to me than paying the absolute bare minimum possible. Also, I work from home, so it’s important that the connection is good.

Amazon Prime
Did you know if you have Amazon Prime you also have a subscription to Amazon Music? It has millions of songs available to stream, you can create your own playlists or listen to existing ones, and it’s awesome. So many people pay for music streaming like Pandora or Spotify because they don’t realize they have this benefit with Amazon Prime! Prime costs a little over $100/year but the benefits are totally worth it for us. It’s billed in one lump sum (for us, it’s in May) but I accrue for it monthly so I’m not caught off guard when the bill comes in.

Major Events Accrual
This year we’re going to three weddings in different parts of the country, and we’re also taking a 10-day trip to Iceland! We set aside ample budget to pay for these things in cash as needed, but at the same time we’re strategizing using credit card points and bonuses to cover most of these things for free. So far we’ve booked a 3-night stay and roundtrip tickets to San Francisco using Chase Sapphire Preferred and SPG points. Once I pay off my dentist bill on my British Airways card using my HSA, I’ll be able to book our hotel stay for free for a wedding in Baltimore (we’re driving!). We’ll use more Chase Sapphire Preferred points to pay for our airfare to Iceland, and soon will have a plan in place to cover hotels there. We might have to pay actual money for Icelandic hotels (gasp!) but we’ll see. Point being, we save for it, and then we still try to be strategic about how we use the money.

Honestly, Alex buys a lot more clothing than I do. But I work from home, so my wardrobe is basically yoga pants and workout tops! Whereas he occasionally needs to spiff up his work wardrobe, so once or twice per year he’ll shop the J.Crew clearance sales and get what he needs. Last year we didn’t accrue for it and in late fall we both agreed his wardrobe was getting a little sketchy, so he picked up a few new things. This year, we’re just planning ahead for it! He might not need anything, but if he does, the money is there. I might buy a new dress for one of the weddings, so we’ll see. With clothing we’re very intentional about what we buy. If we need something, we get it. We wait until we need something to start shopping for it, rather than browsing around nonstop and letting advertisers tell us what we “need” constantly.

I love to host family and friends around the holidays or for different events throughout the year, so we plan for it! This covers the extra food and alcohol we buy above and beyond our normal grocery budget, and also any extra travel expenses to visit people if I’m not hosting. There is no reason not to plan for holiday expenses – you know they’re going to happen! My family did Christmas 2017 a week early because flights were significantly less expensive for my brother, and that’s also a completely reasonable option as well.

Birthdays/Misc. Gifts
This covers birthday and Christmas gifts for immediate family members, as well as “one-off” items like baby showers, wedding showers, any kind of showers. We have a pretty good grasp on who we’re buying birthday gifts for, who’s getting engaged, who’s getting married, and who’s having babies each year, so we plan for it. Don’t forget bachelor/bachelorette parties!

Domestic travel
Outside of our trip to Iceland, we’re spending a few days in New York for our anniversary, I’m visiting my brother in San Francisco and a friend in LA, and Alex will take a trip or two with his friends. Since I plan my trips way in advance, I know more or less what I expect to spend, and plan for it.

This is what’s left over after we spend money in our “key” categories for the month. It’s not a huge amount at all, and usually gets used up with miscellaneous purchases that don’t fit anywhere else. For example, I preordered a book in November that shipped in January, so I was charged in January. I don’t have a book purchase line item in the budget, so I took this out of the “buffer”. We track expenses at a line-item level, so I know exactly how much I spent and how much is left each month. Whatever doesn’t get used goes into savings!

That’s it! We intentionally do not incorporate any anticipated bonuses, raises or tax refunds into our plan. Everything above and beyond our “normal” income we assess the best use for as it comes in. Building a budget around money you don’t know you’ll get is not a great move. Don’t book a vacation anticipating that you’ll get a big bonus. You might not. Don’t make major material purchases in anticipation of getting a tax refund. You might not. These things are fluid and changing all the time, so it’s safer to plan your expenses around your normal paycheck if you’re an employee. If you’re a freelancer, all the more important to keep very close tabs on where your money goes each month because your income can fluctuate so much! I also don’t plan separately for personal upkeep, because my costs are so minimal it’s not even worth it.

There are some categories that don’t apply to us but are still pretty common, so listing here for consideration:

Car payments/Transportation
We own our cars outright, so we don’t have any car payments to account for. I encourage people to buy cars they plan to drive for a long time, rather than leasing or buying new very frequently. When your car is paid off, keep “making payments” to an account to save up for your next car. You’ll have way more leverage to negotiate if you’re paying cash.

Student loans
We paid off our student loans (I made my final payment on my way to FinCon17!) so you won’t find those in our budget either.

Personal loans / credit card debt
We don’t carry debt outside of our mortgage, so there’s nothing to list here! If you do have credit card debt or a personal loan, I personally recommend paying off the highest interest balances first, because those are costing you the most money. There are myriad schools of thought on this topic though – the “snowball” method involves paying off your smallest balance first, celebrating the win, and building momentum for larger balances. You might pay more in interest that way but it can be highly motivating as well! Others suggest paying off the debt that pisses you off the most first, and that also totally makes sense! Ultimately it’s up to you to choose what will be most effective for you.

Personal upkeep
As I mentioned, I have a pretty low-key beauty routine that I outline in excruciating detail here. Realizing not everyone wants to start cutting their own hair and nixing makeup most of the time, it might be worth considering incorporating recurring costs like haircuts, waxing, nail salons, makeup, etc. into your budget if that’s something you do frequently!

Ready to get started with setting an annual budget? Remember to maintain the mindset of gratitude, excitement and opportunity, and take breaks if you need to as you go through the process. Getting started is the hardest part but then it’s SO much easier to maintain once you get going. Let me know how it goes in the comments below!