Meet the Joneses: The Budget Refresh

It’s time to check in again with Joe and Josie Jones: our hypothetical average American family as they stomp into fall under the new normal. They’re eight months into gaining control of their finances and ready to take their budget to the next level of awesome.

A friendly disclaimer before we begin: there is no one-size-fits-all budget, and financial pictures look very different from one family to the next. This is a fictional account to use as an example and the median household income and average debt loads seemed like a nice place to try and do that.

A Quick Recap

Part 1: Budgeting in April 2020

• Hello, global pandemic
• Joe and Josie started a budget
• A $3,400 stimulus check arrived

Part 2: Budgeting in May 2020

• Josie got laid off and filed for unemployment benefits

Part 3: Budgeting in June 2020

• Cash-rich month (student loans paused + unemployment benefits)
• Extra money is stashed in an emergency fund
• Credit card balance stayed steady

Part 4: Budgeting in July 2020

• Net worth increased 84.5% since they started budgeting
• Firmly out of the paycheck to paycheck cycle
• Finally felt in control of their money

Part 5: Budgeting in September 2020

• Back-to-school season is fully virtual
• Started September fully funded
• Financially a wash between virtual and in-person school for the Joneses (even if the same can’t be said of stress levels between the two)
• Joe & Josie crave financial security and want that credit card balance gone.

The World Outside

Wildfires are raging, murder hornets are buzzing, political mail is unending, COVID cases are spiking, Zoom is maddening, holidays are weird, and everyone seems angry. To put it simply, it’s a hot mess out there.

The World Inside

Within the four walls of home, the Jones family have settled into their new routines. The best addition: the newly instituted Taco Tuesday as a family—a tradition that would’ve had no time or space in pre-COVID times with everyone’s busy schedules. The worst—the whole family has now joined Josie in her precious once-a-week ritual watching The Bachelorette and leave no snide remark left unsaid.

While some days are certainly better than others, Joe and Josie have turned their energies toward what they can control—and one of the first things that falls into that camp? Their budget.

The Budget Refresh

Back in March, Joe and Josie’s financial life was like a hoarder’s garage—a disorganized mess that seemed to grow in complexity and stacks of National Geographic every month.

Now, it’s a completely different story: it’s like all the piles of junk got moved out of the garage and you can see the floor again! With this newfound lightness, they want to take it one step further and get their budget into perfectly organized, logical shape. That includes:

• Adding and editing current categories
• Reworking the category structure
• Setting a goal to pay off the credit card (!!)

Adding and Editing Categories

After watching their Christmas category expand into a nice pot of money for the upcoming holiday season, the Joneses are now firm believers in funding True Expenses. Their current list of True Expenses was fairly short (Health Care, Christmas, and Amazon Prime) and they wanted to add a few more.

New Categories

• Auto maintenance & registration (oil changes, new tires, license, tab renewal)
• Home maintenance (new roof, new hot water heater, new dryer)
• New technology (Computer/phone replacement)
• Life insurance (they hadn’t had life insurance before this and finally got some term coverage!)
• Child care (babysitters)
• Kids’ activities (piano lessons, summer camp, etc.)

Edited Categories

• Subscriptions: instead of having separate categories for Netflix, Spotify, and Amazon Prime, they combined them all into a single “Subscriptions” category.
• Fun money: their prior budget had a single category for both Joe and Josie’s fun money. Their new and improved budget gave them each a separate category so now it wasn’t as much of a race at the beginning of the month to drain the category before the other person could get there.

See other non-monthly expenses to add to your budget here.

Reworking the Category Structure

When Joe and Josie started their budget, their Category Groups were split into Needs and Wants. They kept everything as simple as possible, because they were in financial crisis mode. But now, the bleeding has stopped—and they’re getting financially stronger. That means they’re ready to add a little more nuance and life to their budget.

Original Category Structure

Here’s a look at the original categories and structure they had set up:

The Needs categories held essentials. These categories were funded first and in full!

The Wants Category Group was for “squishier” expenses. These would be the first categories to be pilfered when money came up short.

New Category Structure

Their new category structure has Flexy Expenses at the top (because those are the categories they look at most often), a group for recurring bills, a new expanded section for True Expenses, a category for Kids (they’re expensive), Fun, and a Savings Category Group for their emergency fund and an upcoming vacation.

You can also see the new categories that have been added to the budget.

See their new category structure:

Adding a Goal for Credit Card Payoff

Joe and Josie have had a credit card balance of around $7K since they started budgeting. They had been paying the minimum while they beefed up the rest of their emergency savings as a safety net. The balance had stayed steady, because every dollar they charged on the card was now a budgeted-for dollar.

With their newfound desire for financial stability, they’re ready to slay the monster and watch that balance go down and down. This month was a three-paycheck month and they put a nice dent in this debt. The balance went from $7,000 to $5,200. Kapow!

And now, they would whittle it down into oblivion. They had a bit of an arbitrary goal in the back of their heads to pay off their debt by the time Christmas rolled around next year.

They set up a goal to pay off their credit card by then and saw it would take an $350/month budgeted toward this debt to make that happen. Did they have that wiggle room?

Looking back at their Income v Expense report, they saw their average income from March to October was $4,518/month (thanks in large part to stimulus money and unemployment benefits).

With their new budget and goals set to each category, they saw their “total needed” each month was $4,171.71.

With roughly $4,518 coming in each month and only needing $4,171 each month, they had wiggle room of $347/month.

Their financial inflows were still in flux, but they had enough of a gap to give this new goal a try. $350/month it is!

Sure, the wiggle room is a little precarious with Josie’s unpredictable inflows, but they could always adjust their goal, and this got them moving in the right direction. In the future, they might need to pull a few levers to hit this monthly goal, but at least they know where they can pull from and how much they need with an incredible level of precision.

Current Financial Health

Joe and Josie have come a long way since March. Check it out. They have:

• $4,500 in an emergency fund
• $1,300 saved for health expenses
• $340 saved for Christmas (no credit card hangover this year!)
• $25/month each in fun money—totally guilt-free spending on whatever they want.
• Life insurance (a new responsible decision they worked into the budget!)
• Categories for “unexpected expenses” so they’ll be ready for their car breaking down, the house needing repair, and for when the phone accidentally goes through the wash and they need a new one.
• A plan to pay off their lingering, pesky credit card debt by December of next year.

Now how’s that for taking the lemons of 2020 and making them into pumpkin spice lattes? Not bad, not bad. Take a nice sweet sip of that.