We have zero debt, but taxes are a killer.
I have always enjoyed keeping a very detailed account of my finances. I even have all of my budget worksheets dating back to 2006 when I first started college. For me, tracking my financial journey helps keep me motivated to stay the course, and it assures me that I’m moving in the right direction. Every once in awhile, I like to really dive into the details, like I am right now, to see if I’m happy with how I’m handling my money.
I’m a 29-year-old freelance writer with a bachelor’s degree in English from the University of Nevada, Reno. My husband, also 29, is a mechanical engineer with a bachelor’s degree from the same alma mater. We both made it through college without student loans, thanks to reasonable tuition costs, grants, scholarships, and (for my husband) a little help from parents.
We bought our first home during the recession and sold it last year for nearly double what we originally paid, allowing us to move into a bigger house in a nicer part of town. We live in Reno, Nevada, and have three kids, ages two, four, and six.
We have a joint account and agree on our budget before the start of each month. Here is how that monthly budget breaks down:
Income: I bring in an average of $4,000 per month pre-tax through my freelancing. No benefits. My husband’s paychecks come out to $4,000 post-tax, after health insurance, dental insurance, and 401(k) retirement contributions (six percent to get the employer match) are deducted. Total monthly cash flow: $8,000. Annual pre-tax household income: $117,360.
Total monthly expenses: We do a zero-based budget, which means if $8,000 comes in, $8,000 goes out. I track every last expense down to the $1.50 vending machine charges at my husband’s work. I know where every last dollar goes and why.
Here’s the nitty-gritty:
- Home Expenses: $1,850
- Mortgage, property tax, homeowner’s insurance: $1,600
- Utilities, water, sewer/trash service, HOA fees: $250
- Other Bills & Fixed Expenses: $2,695
- Life Insurance: $54
- Car Insurance: $40
- Phone/Internet: $65
- DirecTV/Netflix: $88
- College 529 Contributions: $300
- Roth IRA Contributions: $900
- Children’s International (sponsor child): $28
- Taxes: $1,000
- Gymnastics Classes: $100
- Husband’s Lunch Money: $120
- Flexible Expenses: $3,455
- Groceries: $820
- Gas/Car Maintenance: $650
- Entertainment (movies, dinner out, wine club, etc.): $250
- Holidays/Parties: $250
- Home/Health Items: $175
- Kids’ Items: $250
- Clothing: $60
- Vacation: $500
- Medical/Dental: $500
- Debts: $0
What Surprised Me
Honestly, I was surprised I actually had to look at my budget to get all these numbers. I have always prided myself on being a budgeting queen, but it turns out that I have to be staring at the spreadsheet to get a good grasp on our finances. That’s partly because our financial state has changed drastically over the past year. We’ve bought a new house, I’ve tripled my yearly freelance income, and our three kids are getting older (and more expensive). So, our budget is no longer as stagnant and predictable as it used to be.
I still have a good overall idea of where our money is going at all times, but I definitely have to stay on top of it. I aim to update the budget every day. I know it seems like too much, but it works for me. I’m a money control freak. Budgeting calms me.
What Frustrates Me
The medical and dental category is the bane of my existence. We have health insurance, but it covers such a negligible amount that we’ve been stuck with over $5,000 in out-of-pocket medical expenses already this year.
With three danger-loving kids (and multiple ER visits per year) it’s like trying to dig your way out of quicksand. As soon as one bill is paid off, we’re back at the doctor’s office accruing more medical debts.
What You Don't See
We actually have quite a bit of money hiding in the eaves. For five years we followed Dave Ramsey’s plan to get out of debt (including trying to pay off the home mortgage for a while). That means we set aside 6 months of bare bone living expenses, which comes out to $18,000.
We’ve also saved up a lump sum for our daughter’s preschool next year which is $6,000 for the year. Then there’s the recent addition of our vacation savings account (currently at $7,000) which fills me with glee every time I see it. That’s Disneyland money, baby. We keep trying to set aside an extra budget for medical expenses but it depletes itself constantly.
What Makes Me Cringe
Taxes are the worst! I feel like I’m making big money as a freelancer because my income matches my husband’s (well, his take home at least), but when all’s said and done a whole quarter of my paychecks are set aside for Uncle Sam. I have to pay quarterly estimates every few months, but because my income is growing, I know it’s not enough to cover it. I have to make sure that 25 percent of my yearly income is waiting for the government to take come tax time.
Last year was my first serious year of freelancing, and the first time we had to pay taxes instead of receiving a refund check. It’s my least favorite part of being a freelancer. It’s such a bummer to watch friends living it up come tax time, while it’s my scrimping season, but I guess that’s a tradeoff I’m willing to make to have a job that doesn’t require wearing pants.
What Makes Me Proud
Seeing $0 in the debt category. It was a long road to get out of debt and stay out of debt. We went through a job demotion during a time of medical stress and ended up on WIC for a few months, but we never fell back on credit card debt once we clawed our way out. We’ve paid cash to upgrade to new (to us) cars. We pay cash for vacations. Because we had paid off a good deal of our home mortgage by the time we sold our first home, we were able to buy the house of our dreams with over a 30 percent down payment.
While I am bummed about having a mortgage payment that’s going to hang around for the next couple decades, having no consumer debt frees us up to easily save 15 percent of our income for retirement, to sock money away for our kids’ college expenses, and save for some great vacations. It’s been a long uphill battle to get to a point where I feel financially secure, and I finally feel like we’ve arrived.