3 Ways Our Budget Can Handle Unexpected Expenses.

Handling unexpected expenses is crucial for any budget, because unplanned spending will always come up.  Here are 3 ways our budget allows us to be flexible and handle those times with relative ease.

Budgeting is a big deal when you’re working on taking care of big debt.  Since we switched to YNAB (YouNeedABudget, for long) our budget has never been healthier.  We’ve learned to effectively budget down to zero, to maximize our debt repayment and to live on last month’s income.

A robust budget should be able to handle unexpected expenses too.  While you don’t know what the expenses will be or how much they’ll cost, you should learn to expect unexpected expenses.

Here are three effective ways we use our budget to handle unexpected expenses:

1. Change How Your Money is Allocated

Most normal, small-ish unexpected expenses you handle by changing the way you have allocated your money. For example, if there is killer deal that comes up on men’s suits (my husband really needs a new one), but we only have $25 allotted for clothes that month, we will have to take money from other categories if we decide that the suit purchase is a higher priority that other things in our budget. For example, we could take $100 from grocery, $10 from entertainment, and so on until we had enough to cover the purchase.

Since we are putting everything extra toward our huge debt goal, we also have two debt payment categories: one for our beginning of the month debt payment and another for our end of the month debt payment (you can read the details of that plan here). Most likely we would have enough in our end of the month payment category to cover the suit purchase if we thought it was a deal that we would have to act on now. If it wasn’t time-sensitive, we would plan it into next month’s budget.

For people who aren’t doing a debt payoff like we are, the unspent money in each budget category would either roll over to the same category for next month (sink funds) to make growing balances OR would go toward savings (or another goal).

2. Split the Cost with Next Month’s Budget

When we have big, unexpected expenses like the recent auto-withdrawal of the student loan payment, we have a couple options because we are living on last month’s income.  In July we had an unexpected automatic withdrawal from our checking account because we were removed from the income based repayment plan for not renewing our status in time. The withdrawal of $697 happened on the 21st of the month, so it was too late to just grab that much from the then-unspent portions of other categories.

We had around $290 in our “end-of-the-month debt payment” category that helped to offset the blow since that was money was allocated to debt payoff anyway.

To cover the remaining $407, YNAB gives us two ways we could share the cost with our next month’s budget. A) Subtract from next month’s “available-to-budget” or B) Subtract from next month’s “category balance.”

With option A, the $407 would be taken out of the total amount that we have available to budget for August.

Option B keeps the -$407 in the category that had the overspending.  The negative number would carry over into the category balance for the next month unless/until it is reconciled (see reconciled screenshot below).

Handling unexpected expenses is crucial for any budget, because unplanned spending will always come up.  Here are 3 ways our budget allows us to be flexible and handle those times with relative ease.

I chose option B because I like having everything taken care of cleanly at the category level so it’s easy to follow what happened. In order to keep the debt area of our budget nice and neat, I added a new category (under the main category “Debt”) called “Surprise Loan Payment.”  After August is over, I will hide that category so I don’t have to see it all the time, but I really liked being able to see exactly how we handled the unexpected expense.

Handling unexpected expenses is crucial for any budget, because unplanned spending will always come up.  Here are 3 ways our budget allows us to be flexible and handle those times with relative ease.

 

Handling unexpected expenses is crucial for any budget, because unplanned spending will always come up.  Here are 3 ways our budget allows us to be flexible and handle those times with relative ease.

Once again, neither of these options would be available if we weren’t already living on last month’s income.  Being able to split unexpected costs with next month’s budget only works because we have an extra month’s worth of income sitting in our checking account.

3. Hit Up the Emergency Fund

A third option is to use our emergency fund.  We try to reserve using our emergency fund only if all other options won’t work. If we couldn’t pull money we need from other budget categories and we couldn’t correct the overspending in the month after the it occurred (or we weren’t living on last month’s income), we would use our emergency fund to cover the expense.

In our real-life example of having an unexpected withdrawal of a student loan payment, the emergency fund would not have saved us.  We did not know the withdrawal was going to happen, so we wouldn’t have had time to transfer money into our checking account.  We really were just saved because we had a month’s worth of extra income sitting in our checking account.

Live and Learn

Unfortunately, we are getting extra experience in managing unexpected expenses.  After the unexpected student loan withdrawal in July, my husband’s car was broken into in August!  The fun never ends!

If you are interested in trying out YNAB, you can get it free for 34 days.  Then if you’d like to purchase it, you can get $6 off the $60 price with my referral link!

How about you?

  • How do you manage unexpected expenses without breaking your budget?

Debt Fatigue: Getting Out of a Debt Payoff Funk

If you haven't faced debt fatigue yet, chances are you will at some point in your journey to be debt-free.  Here are some ways to fight the funk and stay motivated.

I received an email from a reader this week who after 3 months of intense debt payoff is facing some debt fatigue.  She and her husband have made great progress and only have about 8 months to go, but are still struggling to stay positive.

Here’s her question:

After your first year when you paid so much on your debt, did you ever feel like you were in a rut or a funk? What do you focus on to get out of it? I’ve been trying to focus on what we’ve accomplished so far and what our goals are, and even telling myself that our situation is lucky but I still just have this negative attitude that I can’t shake. It’s bugging me because I’m normally an optimist and go-getter but the debt-battle blues are really getting me down. 

If you haven’t faced the “debt-battle blues” yet, chances are good that you will at some point in your journey.  For me, the first step to getting out of a funk is figuring out how you got there in the first place.  Some common causes of debt funk are:

  • Making too many lifestyle changes at once
  • Being tempted by your old lifestyle
  • Not making the progress you had hoped
  • Not seeing the big picture
  • Having a goal that feels too far away

 

Funk Fighters

  • Be realistic-- I have tried not to compare the $36K that we paid toward debt in 2013, with the total we’ve paid in 2014.  See– I’m not even going to add it up right now!  We knew that emptying out all of our other savings would make a bigger dent than we would be able to make in subsequent years (until we have some serious increases in income), so we don’t make ourselves sad by comparing.
  • Relax your rules a little–  Don’t break the budget or get any crazy new habits, but giving yourself a little wiggle room can make a big difference.  For example, I told my husband to stop by the store and pick up some bread on the way home from work.  We have been baking our own bread since we started our debt payback adventure, but for the past week I have resorted to putting PBJ tortillas in my kids lunches because I have been too exhausted to make bread lately.  We have something like $80 left in our food budget for the month that ends in less than a week.  My health and sanity right now are worth the price of a few loaves of bread.
  • Track your progress– It could be a fancy net worth spreadsheet that helps you track your progress or a giant thermometer on the fridge that you color in red as the principal decreases.  Having a visual representation of your progress can help you stay motivated.
  • Set smaller goals– You probably already have a debt-free date that you’re working toward, but if you’re fighting big numbers like us, that date may be pretty far away.  Setting smaller goals helps you stay focused and gives you chances to feel success more often.
  • Find something to celebrate– Celebrating the achievement of smaller goals helps you stay on track by rewarding your progress.  Celebrations shouldn’t be expensive or elaborate, but should still motivate and excite you.  Celebrating your success is especially important if you find yourself a frequent victim of debt fatigue.
  • Get an accountability partner-- If you don’t already have someone to encourage you, think of someone who would make a good accountability partner.  This may be your spouse who is facing debt with you.  The hope is that when you are in a funk, your spouse (or whoever you choose for your accountability partner) will be able to help you see the light, and vice versa.

 

How about you?

  • What have you found to be the root cause of your debt fatigue?
  • What to you to get your motivation back when you’re in a funk?
  • What advice would you give specifically to this reader who is facing the “debt-battle blues?”

My First Interview

Interview with Stephanie from Six Figures Under about how she and her husband got into over $130,000 of student loan debt and what they're doing to get it paid off as soon as possible.

I have a surprise for you today!  Instead of my normal post, I want to share with you my very first interview.  Instead of reading, you can listen!

A couple of weeks ago, Ingrid Talpak contacted me and asked to interview me for her WebTalkRadio show Living With More Style than Cash.  The idea was more than a little frightening.  I know sometimes it’s strange to hear someone’s voice after you’ve been reading their words and imagined a voice that was totally different.  But alas, I decided to give something new a try and I’m glad I did!

I was really nervous at first.  Really nervous!  But once I started chatting with Ingrid, the nerves floated away and it was just like talking with a friend.  I really enjoyed our conversation.

You can listen to the interview here!

For those who are new here…

If you’re new to Six Figures Under or stopped by after hearing the show, WELCOME!  I hope you find encouragement and practical tips to help you on your own journey to improve your financial situation.

Here are some posts to get you started or that I mention in the show.

Our Story

Debt

Budgeting

Living Frugally

Earning Extra

 

I would love for you to follow along on our journey to be debt-free!  You can find me on Twitter, Facebook, Google+ and Pinterest.  You can also subscribe below to be notified of every new post at Six Figures Under!


Linked to Thrifty Thursday

Cheesy Squash– A Simple and Delicious Zucchini and Yellow Squash Dish

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

Anyone who has planted zucchini (or is friends with anyone who has) knows that zucchini is prolific.  During the summer months we have no shortage of zucchini and yellow squash. Like any good zucchini grower, we have lots of ways to fix this versatile squash.

One of our most favorite ways to eat them is in this simple side dish, which we call “Cheesy Squash” for obvious reasons.  Cheesy squash is a family favorite on my husband’s side, so I learned about it from both my husband and my mother-in-law.

We always receive rave reviews when we share cheesy squash at gatherings.  Everyone wants to know how we make it, then when we tell them, they can’t get over how simple it is!

Like any classic family recipe, there’s more a set of directions than an actual recipe.  I’ll explain the way we make it and you can feel free to adapt it the way you like!

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

We pick our squash when it’s ripe, but not overly ripe.  Well, we pick those too, but use those zucchini clubs in other recipes.  I used all of the squash pictured (about 5 pounds) in one batch.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

My mother-in-law has this wonderful mandolin slicer that was her mother’s.  I always send one of the kids upstairs to borrow it from her when I make cheesy squash.  You can cut the squash by hand with a knife, of course, but having a mandolin slicer really speeds things up and ensures that your slices are even.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

We slice the yellow squash and zucchini about 3/16 of an inch thick.  You can go a little thicker, but if you go much thinner, it turns to mush when it’s cooked.  You don’t have to have a handy mandolin slicer.  We’ve done it with a knife as well, but it does take longer that way.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

We layer the slices in an electric skillet, making sure to separate any pieces that are directly on top of each other (as if they weren’t cut).  Pile the squash up as high as you can and still have the lid fit.  It will cook down.  We fit 5 lbs of squash in our electric skillet.  My mother-in-law has a skillet more like this that fits about twice as much squash because it’s not only longer, but deeper as well.

My husband puts a tablespoon or two of water in the bottom to keep the squash from burning.  My mother in law uses no water, but starts the temperature a little lower so the squash has time to release some moisture before the bottom gets burned.  Either way works, although they’ll both tell you their way is better.

Sprinkle 1 to 1.5 Tablespoons of salt evenly-ish over the top.  Don’t fret if some pieces look super salty.  When it starts steaming, the salt will amazingly spread evenly throughout!Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

Plug her in and set the temperature to about 300 degrees.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

It will get nice and steamy in there.  After about 20 minutes, take a peek.  If you have less squash, check it after 12-15 minutes.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

The squash should be wilty and allow a knife to cut through the layers with ease.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

Cover the squash with shredded cheese to your liking.  Some will melt immediately.  The rest will melt quickly if you put the lid back on (with the power off) for a couple minutes.

Cheesy Squash is a delicious way to enjoy the zucchini and yellow squash from your garden.  Everyone loves this simple summer side dish.

Serve as a side dish with any summer meal, or just have a some for a snack!

One skillet-ful lasts us several meals and two or three squash plants can produce a skillet of squash twice a week at their peak, so we eat a lot of this.  Just store leftovers in an airtight container in the fridge and warm up in the microwave!

Linked to One Project at a TimeThrifty Thursday