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.
This post contains affiliate links, which means I get a small percentage of any purchases you make using these links. I only link to items I highly recommend for a money-smart family life. Please see my Disclaimer for the details.
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.
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 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.
May 2021 spend summary
May 2021’s credit card billings due for our family were $4,043.05 in total. But I’ll show you a few adjustments of where certain portions of those charges were covered to reveal our actual, effective spending behavior and total.
We had a car repair of about $1,500 during this month, so I transferred money from our savings account to cover that portion of the Citi card bill, or just what I need after absorbing what I can into the normal spending. That’s what the emergency fund is for!
I also put a few things on my Visa card ($307.09) that are related to blog expenses so I transferred money from my doggie daycare side hustle funds which I currently use to support blog expenses.
Then you can see I had a pretty significant return to Zappos in process as well (~$250). That was my big order of like a dozen pairs of baseball cleats so our son could try them all on in various sizes and then just keep the one pair we wanted. (I find that so much more efficient than sifting through the shelves at a store.)
So the table below shows those adjustments to the actual billings, which then reveals our effective spending to check against our target monthly spending cap.
Total actual spending for the month… $1,958.73. Score! We stayed within $2,000.
As far as what fit into that $1,958.73 total across our three cards, among other odds and ends, we paid for…
- A month of swim lessons for our son, baseball equipment for starting Little League, preschool photo prints of our daughter, and a session of soccer classes at preschool.
- One of the kids’ annual cord blood banking fee of $185.
- A bunch of mundane subscription shipments of deodorant, toilet paper, Kleenex, dishwasher detergent, and so on from Amazon.
- All our groceries on the AMEX.
- Gas in the cars at Costco on the Citi card.
- Our dutiful seasonal (er, more like monthly) spending at Home Depot like good homeowners.
- And we (ahem, my husband) even splurged and bought a simple baseball pitching machine to help our son practice hitting- I mean, why not right?
Key Takeaways
So, all in all a successful spending month. Had some fun and memorable family purchases (yay, cute preschool photos!), didn’t stress about having a separate budget line for a splurge pitching machine purchase, and successfully stuck to our ‘budget’, i.e. stayed below our target monthly spending cap.
I can’t tell you what we spent on toiletries vs gas vs clothing vs sporting equipment vs online banjo lessons… and I’m glad I didn’t spend time trying to preplan and track all of that. Bottom line is we stuck to our bottom line. Without the stress and minutia of a categorized budget. (If I do want to see the dirty details, though, the online credit card account tools have pretty robust spending analyzer features to whittle down where dollars are going, so that is helpful once in awhile- and it’s automatic!)
Ultimately, we stayed under by watching our spend rate (remember, fast or freeze as needed) throughout the month on our two main spending cards (ignoring the car repair, since that would be paid from the emergency fund in savings).
We made frugal choices on our everyday purchases (i.e. groceries at Aldi). And we said ‘no’ to things throughout the month to avoid going over our cap– maybe skipped takeout when it sounded good, held off on the fancy baseball equipment bag when we had enough invested for one month in cleats, pants, bat, and helmet, left some stuff in my Amazon cart to decide on later instead of purchasing right away, you get the idea. You skip some stuff, put it off until later, whatever you need to do.
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 organized with a simpler system with a free workbook (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: