Budgeting for the Year

My wife and I have this wonderful thing we do to keep ourselves in sync with longer-term goals — we make a budget for the entire year.

This budget includes only the anchor items for the year — big-ticket items like family vacations, planned home improvements, charitable donations, IRA contributions, tuition, etc.

We have one spreadsheet that tracks this, and we update it every so often throughout the year to see where we are. Each item sometimes has a target month attached to it (sometimes not), so we know about how long we have left until it hits.

We then track how much savings we have, and if we are on target to be able to afford all of these things in the yearly budget. We usually call this savings our slush fund, but that’s only because we haven’t come up with a better name for it. Some folks call it a personal escrow account — I find that too intense.

The wonderful thing about this account is that we have taken out the big goals from the month-to-month budget, so each month is more predictable, and yet we still get to do all of these wonderful things. We know exactly what we have left to work with each month, including what needs to be saved in that month to keep the big goals on track.

I highly recommend this to anyone, but it is especially helpful to married couples as a communication tool. How you spend your money is a reflection of your priorities — it is very important to stay in sync with your spouse on priorities.