I previously discussed how we budget. I was going to include as part of that a description of what kinds of expenses we include in different categories, but that part of the post ended up being so long it made more sense to put it into a separate post. So below is that information. I highly recommend reading Part I for context.
Giving – Christmas presents, birthday presents (to those outside our immediate family, i.e. not our kids), giving to church, shouting food and drinks for friends and colleagues, assisting my wife’s family in the Philippines.
Bills – All essential spending, i.e. electricity, internet (you can debate this one if you can get by with a mobile plan but for us it’s essential), insurances are the big three. I have also sneakily included iCloud storage here as well.
Transport – Petrol, warrant of fitness, vehicle registration, servicing and maintenance, tyres. As earlier stated, this should include depreciation for most people but we don’t. It also includes the odd bus card top-up for my wife, who doesn’t drive. Hot tip for saving money: don’t own two cars. I’ve been trying to wash the car at home recently rather than fork out for those fun machines at petrol stations.
House Costs – Probably a misleading name as you’d think it includes insurance but it doesn’t. This is purely mortgage (principal and interest) and property tax or rates as we call property taxes in NZ. Depending on what part of the country you’re in you may need to account separately for regional council rates or your city/district rates bill may already include those so do check.
Home Expenses – This covers everything from can openers to skip bins (which we somehow keep needing because we’re throwing things out faster than we’re buying them these days). TV wall brackets. Basically any knick knack or home-related task you can think of. If we were really being honest with this one it would be much larger than $50 a fortnight as we would want to factor in future large expenses such as re-painting the roof one day or having to buy a new lawnmower if the one we have goes kaput. But because we’re operating on a much shorter timeline for our retirement plan, we’re not factoring those things in.
Miscellaneous – This is purely for the unexpected. Doctor visits (thankfully subsidised as I have health insurance through my work), dentists, unexpected trips to attend funerals, could be just about anything that happens more or less without warning and can’t be paid for through any other envelope. This envelope has proved to be a real key to sticking to the budget and I’d highly recommend having some kind of “miscellaneous” fund because these things are the things that frustrate you and keep screwing you over financially. It’s an emergency fund by any other name I guess, except it never really builds up to that point because something always comes up! My idea of an emergency fund is more for an eventuality like a redundancy needing three-to-six months of expenses saved up, whereas this is more for day-to-day emergencies. But I’m sure you get the idea.
Entertainment – Movie tickets. Apple Music subscription (annual instead of monthly saves a bit but make sure you leave enough money in the envelope to cover it each year). Concerts. Exhibitions. Basically anything that’s not eating or travel, although it frequently ends up being robbed to top up our dining out envelope because that is the one area of our spending that we do not have under control yet 🙁
Groceries – In addition to actual food (from the supermarket and not anywhere else unless), this covers toiletries, household consumables such as cleaning products etc. Basically anything you can buy in a supermarket. We’ve really nailed this one recently and have been able to shrink this envelope as a result. I highly recommend shopping online and doing pickup. No delivery fees, no fees at all if you’re spending a not-too-large amount and it tallies the total for you while you’re adding items to the cart so you can remove stuff at the end if you find you’re over budget. We’ve actually gone back to just shopping at the store, but doing a stint of online ordering helped us to cull some things from our lives that we could live without and save some money!
Day Trips – Once or twice a year it’s nice to get out of town and have a change of scenery, either for a day or for a night or two. Once it becomes an overnight thing obviously it gets expensive quickly because then you’re bringing accommodation into the equation and you can’t just pack food from home. But for us, part of the fun is not having to make the food ourselves anyway so we have to budget that in too. Because of this our last trip ended up being a few hundred over budget so our day trips envelope is still “paying us back”. This means the balance actually sits at zero right now and will do for several more fortnights until we’ve covered all the extra money we spent above what we’d budgeted. It’s not ideal but means it will all come out in the wash essentially.
Philippines Trip – It’s been a couple of years since my wife last saw her family and that’s important. They actually haven’t met our daughter in person yet because she was born since the last time we visited. So this is definitely a priority despite the blow it will deal to our other savings goals. It will also delay our financial independence by a not insignificant amount of time. Thankfully travel in countries like the Philippines doesn’t have to be expensive but one cost you can’t really do much about is airfares. Oh, to have US-style travel rewards schemes here in NZ! Our equivalents are a bit pathetic and hardly worth it unless you spend so much on your credit card that you’d be better off just putting that money towards your travel anyway.
Savings – This is essentially the “leftovers” in our budget, but we periodically review our spending in all other areas so that we can try to grow this envelope as much as possible. Once we’ve made our trip to the Philippines you’ll see this account really hit its stride!
Clothes and Grooming – What it says on the box basically. My wife cuts my hair but as you can imagine I’m not qualified to cut hers so her haircuts come under this envelope, as do all the clothes and shoes that she and I need.
Dining Out – Everything from McDonald’s to anniversary dates (yep those are definitely mutually exclusive in our family). If it’s food and doesn’t come under groceries, it goes here.
Kids – Kids clothes, puncture repair kit for stroller tyres, toys, gifts for kids’ birthdays and Christmas. Anything kid-related, though not nappies and other consumables, those come under groceries.
So that’s how we categorise things. How about you? I don’t think there’s really any right or wrong here and it’d be really interesting to see how other people approach this!
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