Okay, nerd budgeting time. I’m the budgeter in our family, and I use YNAB. We’ve used this program for several years and love it. However, within the last year, I’ve added some categories to our budget that have made a huge difference in how smoothly our monthly budget runs. Namely, we used our raise to budget for true expenses.
What Are True Expenses?
True expenses are irregular expenses that you have to pay every six months or year such as auto insurance, house insurance, property taxes, etc. Or, they can be expenses that you’ll have to pay but don’t know when like medical payments, house repairs, or car repairs.
We always had categories for these expenses, but we couldn’t fully fund each one, leaving us short when these expenses popped up.
Create Categories That Reflect Your Spending
When I first started YNAB, our money was T-I-G-H-T! Thankfully, my husband has gotten a raise since then. However, rather than increasing our standard of living with his increased salary, we instead used our raise to budget for true expenses which had previously caused hardship to pay. Here are the categories we expanded.
We don’t feel the need to keep up with the latest technology. Our cell phones are four years old. However, we both use our laptops heavily for our jobs, and we need to replace them every three years or so. In addition, my husband sometimes needs items like an ergonomic mouse or keyboard.
When these expenses used to come up, we’d really struggle to pay for a new laptop upfront. When he got his raise, this was the first category I expanded. Now, we set aside $83 a month to fund our laptop/technology fund. Since the expansion, we’ve been able to buy new computers and other electronic items we need with cash in full.
Most real estate gurus say that you should set aside two to four percent of your home’s value annually for repairs and replacements. I know this is good advice, and I wanted to follow it, but we didn’t have the money. Instead, we could only set aside about $100 a month, which was inadequate.
After his raise, we increased the amount we set aside for home repairs to one percent of our home’s value. When he gets another raise, we’ll increase this amount to two percent.
We also had a gifts category in the budget, but, like our housing repair fund, it was inadequate. Before, I set aside about $10 to $15 a month for gifts. After my husband’s raise, we increased that to $100 a month. Now, I can pay for baby shower, Mother’s Day, birthday, and wedding gifts I may need to buy with cash, which is a great feeling.
Rather than increase our cost of living, we used our raise to budget for true expenses. Now, we have some financial breathing room because we’re not always coming up short when we need to buy a gift, or a piece of technology, or make a home repair. The next raise my husband gets, we plan to finish fully funding our true expenses, and then we’ll pivot to increasing our investments.