Part of the mission of The Family Money Mentor is to pull back the curtain on how families (well, my family at least) manages finances. And that includes the most volatile piece of family finances, how to stick to a budget. Or, in our case, a simple monthly spending cap (no categories!).
I’ve described in another post why I believe categorized budgets fail people. Mainly, expenses aren’t that consistent, and having to plan ahead and control every penny for every stinking thing that comes up… well, I think it’s super inefficient and also ineffective.
Instead, we know what our monthly spending limit is. We watch our spending rate throughout the month and do our best to ensure we don’t go over that monthly cap. It isn’t always perfect, but on average, it works to control our day to day discretionary spending so that it fits into our broader financial plan.
Part of that broader financial plan is having layers of savings in place to handle emergency expenses (layer 1) and irregular planned expenses throughout the year (layer 2), so check that system out as well. It is a critical piece of tying together your day to day spending with the less frequent (unexpected & expected) family expenses, to ensure smooth monthly cash flow.
The purpose of these monthly posts on our spending is to show you the details so you can see how this non-budget approach works in real life.
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What's In This Post
Our basic spending mode
First, we use credit cards for all spending. We pay each card off in full every. single. month. No exceptions. Learn how to get the most out of credit cards without falling prey to the pitfalls right here!
Currently we’re using three main cards:
The Amazon Prime Rewards card earns 5% back at Amazon.com. This is where we get our regular household supplies through Subscribe & Save every 2-3 months. And we tend to order most of the other ‘stuff’ we need at Amazon as well. So this card is our default payment there, and it’s also the card I carry for any spending I do out and about.
The American Express Blue Cash Preferred card earns 6% back on groceries. I don’t love the online AMEX interface and it has a $95 annual fee, but the grocery rewards on this card are too good to pass up and more than make up for the annual fee. So we don’t use it for anything else but grocery runs. And I don’t track the spending rate on this card throughout the month at all. It’s just the usual grocery bills and that’s it. No muss, no fuss.
The Costco Citibank card earns 4% cash back on gas so we use it for all gas (which we mostly buy at Costco for the lower price at the pump). It’s also the card my husband carries, so his out and about spending goes on this card.
Sticking to our monthly budget/spending cap
Our currently monthly spending cap is about $2,000.
This amount encompasses all our day to day life spending, including groceries, gas, eating out, kid stuff, etc etc, all those bajillions of family budget categories you could come up with if you wanted to. It does not include our monthly bills, like mortgage, utilities, cell phone, internet, insurance, etc. There are a few automatic regular charges, however, like monthly swim school membership. I don’t consider temporary things like that (even if they go on for quite awhile) to be my usual ‘fixed expenses’ to draw out of our checking account directly. So they bill to one of the credit cards and must fit into our monthly discretionary spending cap.
This spending cap also does not include any medical/dental/vision expenses because those (generally) come out of our HSA account. We benefit from an HSA account as part of carrying a high deductible health insurance plan. Part of the plan premium actually passes through directly to that HSA account so that is helpful.
Each of our credit cards closes on some date throughout the month, and then gets paid on its due date the following month. I pull money in from savings or my business funds (currently just money I pile up from my side hustle of part-time doggie daycare) to cover certain charges, as you’ll see in each summary.
June 2021 spend summary
June 2021’s credit card billings due for our family were $2,078.32 in total. This month there wasn’t much additional adjustment necessary to find our true ‘spending’ for the month. There was just the $128.95 of business related expenses covered from the doggie daycare funds. All the rest was family spending.
Any month that passes without any emergency expense is worth acknowledging, so woot for that!
So the table below shows the adjustments to the actual billings, which then reveals our effective spending to check against our target monthly spending cap.
So total actual spending for the month… $1,949.37. We stayed within $2,000 another month. Victory. Because that’s what a spending strategy is all about… execute your best effort to stay below the cap one. month. at. a. time. Even one week at a time! Eventually you get really good at it. And it reaps big rewards. Just keep swimming…
As far as what fit into that $1,949.37 this month, we spent on…
- Another month of swim lessons for our son (last month of formal lessons before summer).
- A day date out! Our first visit to a restaurant in over a year when we both had time during a weekday, post-vaccination, with both kids taken care of elsewhere simultaneously. Lovely lunch, lovely weather on the patio. Miracle!
- Dad & son outing at Top Golf. The 7-yr old actually hit the ball pretty well!
- Some streamed movie rentals for family movie nights.
- The annual Prime membership dues at $119, one of those smaller irregular expenses absorbed by the monthly ‘buffer’ set aside before calculating your target weekly burn rate.
- More of the usual mundane subscription shipments of deodorant, toilet paper, Kleenex, dog bones, and so on from Amazon.
- The regular obligatory Home Depot spending, $80-ish this month.
- The recurring shipment of B’s dog food and treats from Petflow.
- All our groceries on the AMEX.
- Gas in the cars at Costco on the Citi card.
Key Takeaways
Another successful month in terms of staying below that cap. A couple fun spends in there, and we also had visits from our parents over this time, so enjoyed some low key entertainment just spending time with family.
Like usual, I didn’t plan out and I can’t tell you what we spent on toiletries vs gas vs clothing vs entertainment vs dining out… That’s just not the point. And all those details are on my credit card statement, Amazon order history, and probably the Home Depot receipts wherever those are (actually you can have your receipts emailed to you there, so you can collect that data easily too!)
Bottom line is we stuck to our bottom line. Without the stress and minutia of a categorized budget.
Ultimately, we stayed under by watching our spend rate (remember, fast or freeze as needed) throughout the month. Because we are using two separate credit cards to collect all our spending (except groceries on its own third card), I track them more or less separately. Meaning, I watch the spend rate and cap on each sort of stepwise. One closes early in the month, the other closes late. So once the first closes, the remainder of the cap is allocated to the other.
It’s all about customizing the system to work for you. Make your choices, watch your burn rate, stick to your limit. Rinse, repeat the next month.
I hope this helps you take a fresh look at your own spending management.
Now, get yourself started with a simpler spending system with a free quick start guide to the burn rate budget (form below), getting on the mentoring group email list so you get those details & know when groups open up, and read these most popular posts: