Tightening My Belt

Normally, I’d say I’m somewhat thrifty. I regularly check on my bank accounts. I make myself wait on major purchases. If I need something, I research deals and coupons, or I wait for sales.

But this year? I’ve spent a little more wildly than normal this year.

  1. New turfstone driveway
  2. Turning my front yard into a garden
  3. Expanding my shed and turning part of it into a greenhouse

All of these projects together total more than the average American family spends on food (groceries and eating out) and entertainment in a year.

food salad restaurant person
Like this but replace the food with lumber, and the plates with lumber, and all the utensils and jewelry, and – you know, everything is lumber now. Photo by Stokpic on Pexels.com

That sounds outrageous. It feels outrageous. But I planned for these projects, and they were all paid for in cash. And, ya know, I love coming home and being greeted by a big, beautiful garden – sprigs of gaura waving in breeze, pink and orange zinnias blooming in clusters of little petals, butterflies skipping around on cosmos. Seeing a lawn that was overgrown 95% of the time (because when you mow in Louisiana, it stays neat for about two hours) depressed the heck out of me.

But some things are changing. I’ve spent the past several years renting out part of my house on AirBnB. I’ve met people from all over the world and, overall, hosting has been an excellent experience. My occupancy rate is around 85%, and while it’s deeply satisfying to provide a safe and comfortable place for visitors to our quirky, creative city…

Y’all, I’m tired.

Low-level stress underlies my every day. Will someone accidentally letting the cats outside? Will the next guest is going to rate me poorly because they expect me to play board games with them every night, even though they won’t say anything to my face about it*? And though I find cleaning satisfying, scrubbing the toilet can be a total skeezefest.

That combined with the stress of my regular job means that some days, I teeter on the edge of a meltdown.

What does all of this have to do with “Tightening My Belt”?

Renting out my rooms brings in extra money – usually at least $1000 per month. Those of you who can do math and followed the link at the beginning of this post will realize that amount easily covers even the most expensive of project-years. In non-project-years, that extra dough means I can get away with just sorta watching my finances but not counting every penny. That makes me sound like a slacker, but I do regularly budget.

My favorite tool for tracking expenses is Microsoft Excel, and I’ve tailored it over the years to suit my needs.

Budget example

Everyone should have some way of tracking his or her money. There are programs and websites to help with this – You Need a Budget, Mint, and the Personal Finance subreddit are solid places to start.

I love the flexibility of an Excel spreadsheet for budgeting.

In the image above, you can see how I track sources of income at the top (“Inflow“). Then I split my expenses (“Outflow“) into broad categories that are divvied up into more narrow areas. Based on studying my spending habits, I’ve estimated my expected expenses. Those are compared with what I’ve actually spent to then determine what’s “Left in the Pot.”

At the very bottom of the spreadsheet, each of the Outflow columns are totaled, and this is used to calculate the Balance at the top of the sheet (Total Inflow minus Actual Total Outflow).

Budget example2
Oops – looks like I’ve blown past my budget in this example…

The final column (“Percentage“) shows my Expected Outflow as a percentage of my Total Inflow. In other words, if I want my hobbies to be 5% of my total planned income, I can adjust the Expected budget for that category until I reach 5%.

How should a budget be split up?

If you search, “How to budget,” many of the top results describe 50-20-30 rule. These guidelines put 50% of your income to living essentials (mortgage, transportation, food, etc.), 20% to financial goals (savings, debt repayment, etc.), and 30% for things you want but don’t need (travel, toys).

I sort of follow the 50-20-30 rule. On my “essential living” costs like mortgage and utilities (the category I’ve named “Bills”), I aim for less than 40% – preferably closer to 35%. Electricity and water are how I can control the percentage here because my usage impacts the cost. Unlike 50-20-30, my transportation costs are not included here, because that’s a highly flexible category for me (I live in an area where it’s possible to bike to work).

brass faucet
Photo by Hossam M. Omar on Pexels.com

Once I set my “essential living” category, I consider how much I want to save or invest that month. Rather than basing this off my Total Inflow, I have it set as a percentage of the Balance predicted to be leftover at the end of the month’s expenses. The primary reason I’ve done this is because I’m trying to shrink my budget right now, but I still want to save. I’m in the process of adjusting my Expected Outflow numbers to be as conservative as possible, while remaining realistic. Failing to meet the high bar set for savings because you were too harsh when predicting your food budget can be pretty discouraging.

After a month or so with my newly-tightened budget, I’ll reassess how I figure out my savings/investment goal. All that said, though, right now I’m at about 25% of my Total budget example 3Inflow.

The rest of the categories have greater flexibility and “lower” priority. It feels weird to say food is a “low” priority, but I still have quite a bit of wiggle room there. Right now, it’s less of a concern to me than building my savings. On that note…

How much should you keep in your savings account?

At the bare minimum, aim for 6 months’ worth of your expenses (Expected Outflow). A more comfortable amount for me is 12 months because I’ll occasionally use a few “months” to pay for larger projects. If I do this when my account is at the 12-month mark, I can still maintain a safe emergency cushion. In other words, what I consider my savings account is half emergency fund and half rotating major expense fund.

So how are actual expenses tracked?

budget example 5Each month of my budget is actually a pair of worksheets in Excel. “A” is what you’ve seen so far – categories, totals, and comparisons. “B” is where we get down to business.

budget example 4

I track the date, where I spent the money, the amount, and the type of expense. At places like Costco where I buy a broad variety of things, I’ll split the receipt across the relevant categories. In the image above, the selected box also has an arrow because it contains a list directed linked to the narrow categories on the “A” sheet. In other words, if I need to switch around my categories titles, it’s just as simple as rewording whatever is on “A.”

If you want, you can use my Excel budget too.

Use it as it’s made or tailor this budget to suit your financial lifestyle. The downside of using something like this is you have to regularly devote time to entering every expense (as opposed to many of the professional products that automatically connect with your accounts). However, this one’s free, it’s easily tweaked, and I feel a bit more comfortable without having my accounts connected to another entity.

Download the Example Budget Spreadsheet here.

How will tightening the belt impact my projects?

As I mentioned in the beginning, this was an extremely busy year for big projects. Moving forward, my projects will either be small-scale – i.e. laying a few basic 12″x12″ pavers – or they’ll be made from recycled resources. Fortunately, I have quit a bit of scrap wood leftover from the shed and fence.

In terms of gardening, I have a pretty good handle on growing most of the plants I favor from seed, which can be a tiny fraction of the price of a mature plant. The subtropical climate where I live also encourages lush growth, so long as there’s enough water. As to the latter point, I have a pretty good irrigation system in place in both my front and back yards.

I’m in a privileged position to cut back while maintaining a satisfying lifestyle. Necessary infrastructure, like the aforementioned irrigation systems, is already paid for and in place. My savings account isn’t quite where I’d like it to be, but it’s still plenty to take me through an emergency. I receive regular paychecks and have access to good healthcare. Being in a position where stopping (temporarily or permanently) a secondary source of income is possible? That’s a luxury, and I’m thankful for the choice.

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*Story time: a couple spent a week with me. We chatted a bit when we crossed paths in the kitchen or living room, same as I’ve done with guests for years. The couple was always smiling and seemed happy. A few days after their departure, they left a scathing review, stating that they’d felt totally unwelcome and had wished to place board games and have much longer conversations. After 100+ 5-star reviews, I was shocked and took the poor review very personally for a while.

There are a huge range of accommodations on AirBnB, ranging from hotel-like experiences to basically couch-surfing and communal living. If you’re looking for a host who will be a huge social part of your visit – someone to eat dinner or watch movies with – that will be advertised on the listing or it should be clarified through messages before your stay.