While it’s been our goal for a long time now to travel the world, we knew it would take some time to build a stable foundation for us to do so. Part of that was building our savings.
For months we struggled with finding a good way to manage our finances. We used spreadsheets and formulas, charts and white boards and finally we decided we just wouldn’t budget our spending anymore. One month later we went through our saved receipts and realized we had spent a ridiculous amount of money (mostly on dining out) and that we failed to save any significant amount.
With both of us determined to travel more, we knew this wasn’t going to work and opted for a budgeting method we had both heard of many years ago: budget jars.
How We’ve Set Up Our Budget Jars
We were initially introduced to the jar system while watching “Til Debt Do us Part”. Gail Vaz-Oxlade showed couples how to use jars to divide up monies budgeted to each expense. (if you are interested in learning more about her method and some tips on dividing up your budget click here for her website).
With this idea in mind, we set about creating our own jars system. Since we had been tracking our expenses, prior to our month of free-spending, we had an idea of how much we were putting towards various expenditures. We also, obviously, knew the cost of our fixed expenses like car payments, rent and utilities, cable and internet.
As a couple we set a monthly budget for:
1. Transportation – e.g. gas, taxis, subway rides, train rides
2. Entertainment – e.g. dining out, shows, sporting games, etc
3. Clothes and gifts – e.g. family gifts
4. Groceries – e.g. food and household needs
5. Other – emergency fund, household projects, etc
Since we both have separate bank accounts, we decided not to pool all the remaining money from our pay together, but instead determined a monthly budget for each expense and deemed whatever was left in each of our bank accounts to be savings for that individual.
We use our own savings to purchase personal toiletries. Each of us now pays into the jar after each payday and we use the jars to hold our cash and our receipts. It hasn’t been easy to adjust to but we have definitely seen results.
So You Want To Budget?
The following are some of our helpful hints if you are planning to try the budget jar method:
1. Be consistent with your jar deposits.
We are both paid biweekly so while we have budgeted monthly, we deposit half of that each payday. Whether you choose to put money in each week, or each month, be consistent and don’t let too much time pass or it will be tough to catch up and reconcile your spending.
2. Get used to paying with cash.
We are often in the habit of using debit or credit to make payments but it is easiest to use the cash in the jars to maintain your budget and it takes time to get used to pulling out money prior to leaving the house. If you really can’t bring yourself to do this, or you have a great rewards program you want to take advantage of on a card, make sure you sub your receipt for the cash in the jars ASAP.
3. Modify your budget as you go.
You may think you’ve worked out the best budget for each expense, but spending through the jar method often leads to some unexpected lessons about your spending habits. Don’t be afraid to modify your budget once you identify areas you can decrease or need to increase. We learned we needed to add more to our groceries budget and decrease our entertainment budget. This also forced us to focus on smarter purchasing and eating patterns which was another lifestyle change in itself.
4. Budget your budget.
Just because it’s in the jar, doesn’t mean you have to use it. If you have extra entertainment money left over, don’t feel obligated to use it. The money is there if you need it but it shouldn’t be a requirement.
5. Plan an exciting goal for your savings.
To help with number 4, decide how you will allocate the remaining money at the end of the month. Make it something you can look forward to and/or something that’s tangible and you can actually see come to fruition.We decided to split ours 50/50 between a travel fund and our online business.
Whether it is watching a savings account grow, saving for a trip or using that money to invest, make it something you can be excited about so you strive to keep some money in those jars.
6. Have change available.
This is a big one that we didn’t learn until well into the second month. If you do not plan to take the money in the jars with you, it is advisable to have change available so that you can produce the exact amount required when cashing in the receipt for the money spent. This eliminates frustrations with what should be a fairly simple process.
7. Personal allowances are important.
With the expenses we defined, it didn’t leave us too much room for indulging in both of our personal vices – McDonald’s iced coffee. Instead of depriving ourselves of our fix, we used our own savings and gave a weekly budget for things like iced coffees.
8. Take the jars on the go.
You can use this method even while travelling by converting the jars into envelopes. Even if you change the expense categories, combining efforts and keeping tabs on your spending will help save money and make you aware of how you spend it.
No matter how you choose to create your budget, having a good line of sight to your expenditures is key to staying out of debt, building your savings and investing in the future. We are putting the money we saved in the jars towards our travel plans for the year and are planning to use many of the tips and tricks we mentioned above in order to stay on budget while we travel.
Update: With our savings, a lot coming from our budget jar method, we’ve packed up and shipped out! This was a great method for us to save money and we’re constantly thinking of ways for us to implement it during our full-time travels.