January 28, 2019

How I Budget

I was honestly surprised by the amount of discussion Emma's recent post on horsey finances generated.  Everyone seemed interested to hear how everyone else budgets, and specifically budgets for horses.

With that in mind, I am not super comfortable talking about my finances, but I'm passionate about personal finance in general, and I feel like my horse budgeting system is pretty solid, so I'm sharing this in the hopes you guys find it valuable.

I wasn't very good with money for a lot of my adult life, so if you're not either, there's hope!  You just have to find what works for you - which may be my way or may be some other totally different way of managing money.  It's kind of like dieting, what works for one person won't work for everyone.

I also highly recommend (or don't...really) living through extended periods of unemployment.  Nothing like not knowing how you're going to pay the mortgage and eating red beans and rice for every meal to make you OCD about money for the rest of your life - that's pretty much when I developed my money strategy.

First, this: we bloggers run the financial gamut from eating ramen to pay for hock injections, to effortlessly wintering at WEF, and everything in between.  Everything I'm going to mention in this post applies to every size budget, no matter how big or small. It's about doing a better job managing the money you have, no matter how much that is.

This is LONG, and about to get super detailed and nerdy, so I summarized my system in a nutshell for those that don't want to stick around:

1. Have one forward, one backward, and one "monitoring" way of looking at your monthly cash flow
2. Put all discretionary spending on credit cards for security's sake, pay them off monthly, and use the cash back rewards to pay for horse shows
3. Don't get too cute with budgeting, it's not worth it
4. Make it easy to track progress at-a-glance
5. Pay yourself first every time you get paid - savings goals dictate what you can spend
6. Spread out semi-big, semi-predictable expenses like horse shows throughout the year
7. Have separate savings accounts for everything you're saving for
8. Save up in advance for very big things you'd otherwise take a loan out for (trucks, trailers) by "paying yourself" that loan payment every month

1a. Have a "Forward" Way of Looking at Your Monthly Cash Flow

 My forward-looking system is not sophisticated at all - it's just a Notepad file.  I use it to plan out where my future money is going to go so that every dollar has a job to do from the moment it hits my checking account on payday.  I usually plan about four months in advance in this file. 

This is probably the only thing in this list that's not equal opportunity - I'll admit this is much easier for salaried workers than for hourly workers, tipped workers and self-employed people.  It's still a good idea to do this type of forward-thinking though, even if you need to make frequent adjustments to your planning based on actual take-home pay.

How Connor feels about budgeting
2a. Put all non-bill spending on credit cards for security's sake, pay them off monthly
I do all of my spending on credit cards (that are paid off in full every month) and keep my debit card disabled.  I expect to be hacked at some point (everyone should) and I do everything I can to limit my exposure and pain in the event I do get hacked someday.

To that point, I keep just $100 in my checking account at all times - my savings is kept in accounts at a different bank with no cards tied to them - so thieves have little to steal if they did manage to get to my checking account.

(Side note: 2a may not be for everyone, especially if you have a lot of credit card debt or you have impulse control issues with credit cards.  But if you are able to use them this way, it's a great way to protect yourself financially and earn free money, see 2b.)

You'd think I was always broke if you just looked at my checking 😂

2b. Use Cash-Back Credit Card Rewards to Pay for Horse Shows!

Between $300 and $400 of my show season every year is paid for by cash back credit card rewards, since I have my rewards set up to auto-deposit into my Horse Show savings account.  It's not a life-changing amount of money, but it does usually add up to three free IDS schooling shows per year!  Can't argue with free horse shows and free money.

Don't need to blur these out, this is how much free horse show money I earned from credit card rewards in 2018.

1b. Have one "Backward" and one Monitoring Way of Looking at Your Monthly Cash Flow
I use Mint.com to look historically back at what I spent (see my 2018 financial challenge posts (1,2) for some details on how I use this data) and also to monitor my current month spending.  Mint is free, by the way.
This month Mint is really good at reminding me that December was a complete financial shitshow 😨

3. Don't Get Too Cute with Budgeting, It's Not Worth It

The way I use Mint has changed a lot over the years.  At first I tried to use it to be forward-looking, i.e, I will only spend $50 at restaurants next month.  But I found that really granular, specific budgets were hard to stick to because life just isn't that predictable.

I eventually realized Mint was much better at helping me identify my bad spending habits after the fact than it was at getting me to stick to tons of teeny tiny probably not realistic category spending limits.  These are my current budget categories:

And obviously I still miss on my budgets some months, haha. THANKS CRAZY DECEMBER ELECTRIC BILL.

The "Everything Else" category represents all of my credit card spending for the month, which again, is ALL of my spending, so that gives me one nice even number to focus on.  Sometimes at the end of my credit card cycle I start saying no to things like eating out or shopping so that I can stay under that number, so it's a very fluid and flexible way of budgeting.

Some people would argue that level of fluidity in budgeting is a bad thing, but anything more specific is unsustainable for me - and I feel like identifying what works for you, even if it isn't what most people consider ideal, is an important part of this whole conversation.

I based the "Everything Else" number on both my historic spending and on my saving goals - I know how much I can spend at a maximum in order to still hit my monthly goals. If you're paying down student loan debt or credit card debt, maybe those goals replace "savings" for you for right now, and that's perfectly fine.

4. Make It Easy to Track Your Progress At-a-Glance

I monitor how close I am to that max number with a widget on my phone's home screen, so I can't just "hide" from what I've spent by not logging into Mint (even though sometimes I really want to 😱):

The only number that matters to me is the one on the right.

In addition to tracking my monthly spending with it, I also use Mint's "Goals" feature to keep track of where I am on longer term goals, like building out an Emergency Fund:

Womp womp, not even close on this one yet.

5. Pay yourself first every time you get paid - savings and/or paying down debt goals dictate what you can spend
6. Spread out semi-big, semi-predictable expenses like horse shows throughout the year

Here's a horse-specific example: I pay myself a "horse show fund" payment once a month into a separate savings account, which you can see in the Notepad file screenshot.  I set the amount for that by taking what I spend on shows/clinics/outside lessons in an average year (which I got from Mint historical data) and dividing that number by 12.

The way I see it, I am going to spend this amount regardless, at some point in the year.  But I can either let my budget take a big hit when the show comes around (blowing a huge chunk of my monthly "Everything Else" all at once), or I can spread that hit out over the year by saving slowly for it so that it doesn't affect my monthly budget at all when I enter.

It's not about reducing the amount I spend, (because I know I can generally afford it or else I wouldn't do it at all), it's recharacterizing the way that amount gets spent to be less painful to my daily life.

I may not be granular with my budget, but I'm exceptionally granular with tracking my transactions so I can go back and look at spending trends and habits.

I've never had a non-routine vet bill (knock on wood SO hard) but if I did, I would pull it first out of my horse show fund, and then out of my emergency fund if I had to.  Minor/routine vet bills come out of "Everything Else". Board (which includes lessons with my regular trainer) and my $35/month farrier bill (If he ever does need shoes, my budget will cry) don't come out of "Everything Else" because both are fixed expenses that come directly out of my checking via check.

7. Have separate savings accounts for everything you're saving for

My husband makes fun of me for this one, but I don't care:

None of those greyed out numbers are huge, lol.  Renovating the house and paying off his student loans really annihilated our finances, and we're just now starting to get back on track.
He's always saying "but money is fungible, just throw it all in one place!" and I'm like "I'm sorry, my brain doesn't work like that."  I need my "future truck fund" separate from my "emergency fund" and my "Horse Show Fund". 

Soon I'll add a "My Next Horse" fund too, since it's almost time to start saving up for 12 y/o Connor's eventual successor (I hope I won't need to spend that fund for many, many years, but you never know)

You get three guesses and the first two don't count as to what breeder will eventually receive the contents of my "My Next Horse (Pony)" fund, lol

These Ally savings accounts are free to open, have no fees and return 2.2% APY, so yeah, I don't see a downside to having a ton of savings accounts.  If I was planning on keeping any of this money longer than 3 years, I'd invest it, but since these are all short-ish term savings goals (or the Emergency Fund, which absolutely should not be tied up in investments), they go here, where they're safe, and still earning a little money.

8. Save up in advance for big things you'd otherwise take a loan out for (trucks, trailers) by "paying yourself" that loan payment every month

Finally, the last piece of my horse budgeting strategy comes to you courtesy of my dad (who am I kidding, half of this post is courtesy of my dad, haha), regarding large purchases most people take a loan out for, like the truck and trailer.  With purchases like this, you have two ways to look at it: you can take the whole thing out on a loan/have a monthly payment/pay a giant corporation thousands of dollars in interest...OR, you can plan ahead for that purchase, pay yourself that exact same monthly payment every month you would've paid the bank, earn interest on that savings instead of paying interest, and eventually pay cash for all or at least some of that big purchase.

With some planning and discipline, you're really not changing a thing here - you're still paying a car payment every month (just to yourself, for a car you don't yet own).  You're not spending any extra money.  You're actually spending less money. 

OF COURSE, this is real life we're talking about here though: vehicles die unexpectedly and trailers get totaled and you might find yourself buying a new vehicle much earlier than you ever planned. But even if you're only a few months into this new style of saving and you only have $1500 in your "next truck fund", that's still $1500 fewer dollars you have to finance on a loan and pay interest on.  It's still a win, financially.

My next truck, which I'm saving for already, so I can hopefully pay cash for a used one when they are coming off-lease in a few years.  Hopefully.  Darn things hold their value way too well.  And in the meantime, crossing my fingers I can keep my current truck going until 2022.

Whew.  Seriously the longest post I've ever written!  Do you guys think I'm crazy now?  I would!

Anyone else use any of these strategies already?  Anyone find this useful? Anyone find this absolutely preposterous and want to challenge me on any of it?  I never feel like my financial strategies are settled, so I'd love to hear opposing points of view too!  Hopefully you got something out of this.  Back to my regularly scheduled short programming after this!


  1. god dammit jen youre so organized. I do all this but in no way would I be able to convey that back in any kind of coherent form!!

    1. TBH I pulled a back muscle yesterday and didn't feel like moving, so it took me most of yesterday to write this lol.

  2. Awesome post! Thanks for sharing. I'm trying to get closer to your level of organization and planning, but life keeps bumping me along the way. Splitting out the larger expenses (shows and vet bills for me) and /12 makes it much easier to plan for in my opinion.

    1. I did not get to this point overnight, that's for sure. My emergency fund was at zero just a few months ago because life happens. Hang in there and keep working toward it, even a little progress is better than none.

      Yeah, that's basically what the splitting it out method is for, it's making it easier to plan for those things. We don't know exactly what they're going to cost, but we know around what they'll cost, and we know roughly when they'll occur. It's just making it easier on yourself to put the money aside ahead of time for something like that.

  3. You're so organized. I used to do all this and then I didn't need to anymore. But I really would like to keep better track of the backwards picture. I have a general idea of what I spend on a monthly and yearly basis, but I am very sure it's not really accurate since I know I add on little things here and there that do add up. I'm not a big fan of the multiple savings accounts instead of one thing, but I feel like people should do whatever works for them. I used to read a lot of financial/budgeting bloggers and the ones who try to convince people they MUST do things a certain way drove me nuts.

    1. Yeah, you'll never hear me saying a certain way is the right/only way to do things. I do think there's a logical order to approaching finances in a broad way that is right for everyone, but I didn't touch on that at all here. My way of doing things especially would cause some people to pull out all their hair. Some people may like it though.

      I would say I don't really need to do this anymore either, as in, my finances would be fine if I didn't approach it like this (I mean, a lot of this came out of my husband being unemployed, and at that point I REALLY needed to do this), but I probably always will now. It's kind of a hobby at this point lol. Maybe if I'm REALLY rolling in it someday, that will change.

  4. definitely agreed with keeping a "forward looking" approach to all this. for me, the biggest motivator in getting more serious about budgeting was knowing that there are things out there that i want to DO. opportunities i want to SEIZE. places to go, things to do, people to see, objects to buy haha. being as realistic about that at the outset really helps me stay disciplined in the application (or lack thereof) of my money to lesser causes haha

    1. I think you hit the nail on the head! If I don't allocate my savings before what I can spend, I spend it all, and that's just taking money away from my future self that I want to do REALLY cool things with.

      You're right about the forward looking part being important. I don't feel like any part of my financial strategy really kicked into high gear before I started doing that. The more sophisticated way to track that is with a program called You Need a Budget or YNAB for short, if you're interested. I found it too complex for me, the Notepad file works great for my purposes.

  5. I've got $$ set aside as well for a certain breeder. I just hope she's still breeding by the time I need a youngster. You have any insight on that?

    1. She reads this blog, you should ask her :D

      No end in sight that I am aware of, although it does get tough sometimes. Support your breeders, people!

  6. This is incredibly helpful! Thanks for writing this! I am def going to start using a few of these strategies (hello - using Credit Card rewards to pay for shows - GENIUS). I am not that great with managing money, and I really should be. Thank you!

    1. You are so welcome! I actually weirdly enjoy helping people with this stuff too, so feel free to hit me up if you have specific questions.

  7. Really neat to see your process! I've been slowly readjusting my spending habits to minimize the damage the horses do to my pocketbook in preparation for building a house, and it's been.... Eye opening! I also have multiple savings accounts although not quite as dedicated as yours haha.

    1. Yeah...I had that eye-opening moment myself a few years ago when I saw how much I was spending on him. That's not to say I'm going to sell him or anything, but I am hyper-aware of every dollar he costs.

      Your savings accounts don't need to be as dedicated as mine! As long as they work for you.

  8. This was a very interesting post! Never heard of Ally...Will be checking that one point for sure. The New car strategy is genius.

    I do the credit card thing too and always pay it down to zero each month. A tricky place for my family is food. Our food bill is basically a second mortgage. We have been looking for ways to shrink it, but we avoid certain ingredients for health purposes and because my daughter has food allergies. Healthy food is expensive.

    1. Food is tricky for us too. I have to avoid wheat, and we've both followed the keto diet for the better part of a decade now, which is pretty expensive. I'll be honest and say we have separate finances and the food comes out of my husband's budget since he does all of our cooking and it's a hobby for him. The biggest thing we've done to save on food is buy a deep freeze so that he can buy up all the Manager's Special meats when he sees them, but outside of that, we just accept we have to have a higher food budget than most people.

  9. At some point in my adult life (maybe after selling Ramone or once my retirement account reached a sum that felt substantial to me) I stopped paying attention to the monthly burn rate of my spending and focused more on my net-worth and different ways to increase that. I still do my best to save - Well maybe not anymore since I'm paying for the wedding, I feel like that's going on the cc and every month I just pay it off with the cash I have on hand rather than moving money around the buckets. That is a tough one to wrap my mind around the not moving it back and forth but just leaving it in the deposit bucket.

    1. Yeah, I didn't even get into my investing/retirement/net worth tracking. I know they don't necessarily need to be, but for me the two are intertwined. Although my FIRST thing I do when I get paid is not even get paid - as I've gotten raises over the years I've put them straight into raising my 401k/IRA contributions, so my net pay really hasn't gone up at all over the years.

      I don't even know how I would budget for a legit wedding, so good on you for any strategy around that. You have like one year to plan for an expense that can cost as much as a car?! Crazy.

    2. Don't even get me started on my car.... everyday I feel like I'm using "The secret" to keep it going.

  10. As someone who works in the financial planning field, I think this is excellent. I found a lot of inspiration in the early days of your blog when you were working off board and carefully searching for saddles online to fit your needs and budget. I was in much the same boat, without endless amounts of money to spend on my horse habit, even though it seemed like other bloggers were routinely writing about $1000+ show weekends and buying new custom boots, new custom saddles, new custom everything!

    I'm not as exact with my budget because all my savings and bills are on auto-pay. I do look at everything annually, and adjust my saving level if I get a raise. Thankfully my horse expenses are pretty predictable since I don't own a horse, I just lease and have my hunt membership.

    The one thing I would add is that if you are not a salaried worker--you can still pay yourself a "salary" from a savings account, in an amount that is enough to cover your monthly core and discretionary expenses. It just requires establishing a base level of savings first to cover those leaner times.

    1. That makes me so happy to hear that those early days impacted you as much as they did. My income has gone up since then, but the way I think about money hasn't changed. I could afford custom saddles, but I'm still rocking the CWD I paid for by selling most of my worldly possessions and a used Dressage saddle that has cost me more in flocking adjustments than I paid for it new.

      Yeah, I know my process is more manual than it needs to be, even though it still only takes me a few minutes a week. Working in the tech industry, I have an inherent distrust of computers (ha) and it feels good to me to manually pay those bills, or more accurately, to get to calculate what goes into my savings at the end of paying those bills.

      That's a good point about paying yourself a salary out of savings. I used to be a waitress and budgeting with that job was hell, but not impossible.

      So good to hear from you again in the comments!!! :)