Sunday, March 31, 2013

Do I Really Need to Bother Making a Budget?

Do I really need to bother making a budget? Boy do I get asked that question a lot! Next question ....What are your budget percentages, I can just follow them, right? Oh brother!

In my life on my homestead, I wouldn't survive without a budget. Small homestead farms don't normally make an abundance of money. So watching every penny and the cash flow is a must.  And after talking with many other small farmers, I have come to understand that each family has different budget requirements. There is no such thing as one person's budget fitting another person's life situation.

I have found that fiscal advisors breakdown budgets into the following categories, more or less:
   Housing : 25-35% of your income
   Utilities: 5-10 %
   Food : 5-15 %
   Transportation : 10-15 %
   Clothing : 2-7 %
   Personal: 5-10 %
   Savings: 5-10 %
   Debt : 5-10 %
   Medical: 5-10 %
   Entertainment : 2-10 %

If my husband and I were to survive here in Hawaii on our homestead, we couldn't even come close to following those percentages. There just isn't enough income. So in order to survive, we came up with our own budget. And by learning to be frugal, be creative, and changing our lifestyle, we can allot more money to some categories than others.

A little inside information about our budget....
   Housing: our % is very low because we own our place, we do our own maintenance and repairs in most circumstances, and our taxes are very low.
   Utilities: Our electric cost was paid upfront when we installed our solar system. We carefully maintain the system ourselves. We budget a small amount each month to cover future replacement costs. Our propane use is dropping each year as we learn to cook and heat more and more with wood. Our phones are pay-as-you-go and we only use them when we must. No idle chatting! So our % is significantly lower.
   Food: We grow, gather, or trade for much of our food. Since we are not financially strapped, we do purchase some foods. Plus we eat out 2-3 times a week. Even with eating out, our % is lower. And if we got tight on the money, we could eliminate most the store bought stuff and restaurant meals. So we have some wiggle room here.
   Transportation: since we have older cars with no debt, we can stay within that suggested %. There is a little wiggle room here for us, so we use it by stashing away some money for future use, to buy replacement vehicles. We accept that there will be no flashy new cars.
   Clothing: Almost all clothing is purchased at the thrift store, rummage sales, or garage sales. So our % is way lower. 
  Personal: this suggested % is a little high for us. 
   Savings: The amount the we can save fluctuates wildly. Some years are better than others, but the past three years have been bad. I think a lot of people can understand this. But we are not saving for our retirement. We are already there, maybe wishing we had saved better in our younger years. But oh well, too late now so we live with it. But we try to save something for future expenses. Now obsessive/compulsives would advise us to cut out the restaurant meals and save that money. Sorry guys, the answer is no. One needs to enjoy life, not just live it like a battle to be our opinion, So to each their own. 
   Debt: our % is zero. No debt. Debt just makes money for someone else, from my point of view. I was raised to live with debt. But as I got older I realized that I was paying a helluva lot more for things when I bought them on credit. Instead of waiting and planning, I bought on credit. So I paid through the nose. Especially on a mortgage! So no more debt for us, if we can help it. 
   Medical: Now, here's the killer. Our medical % is a whopper! If I were to allot 10% to medical, we would have to have an income of $120,000. Yikes! For real! Our annual medical insurance, deductible, co-pays, and non-covered expenses comes to around $12,000. And we try to avoid going to the doctor. Sadly most small farmers and homesteaders go without medical insurance. They just can't afford it. At our age, we are afraid to be without. I see our non-insured friends getting really, really poor medical care when something goes wrong. I could tell you true tales that would make you cry, rage, and be disgusted. So half the year we slave just to give money to the big medical infrastructure. 
   Entertainment: Here's another area where our % is lower. We gradually switched over to free and cheap sources of entertainment. We still spend a little each year to go the the local theatre, so that could be eliminated if we had to. 

All in all, you just have to look at a budget as a personal thing. That's my take on it. Figure out something that works for you, then adjust it as you go along. But by making a budget in the first place it made us aware of where our money was going. It prompted us to think about how we wanted to spend our cash.  It also gave us targets as to how much income we need to earn. 

Depending upon what's happening, our budget changes from year to year. We just adapt. 


  1. I'm reading back from the beginning.

    Before I go on I'd like to introduce myself and my husband briefly. We are semi-retired. We currently are caretakers of a big cattle ranch in Northern California. We live on social sec and a small stipend from the ranch. They give us free housing and utilities and we get to use the ranch vehicles for much of our travel. We live really frugally so we're all versed. We want to live some where the weather is kind. I lived in Hawaii on Oahu when I was young so I already have sense of island life. My husband doesn't need to and furthermore it looks like his only daughter and her family will be moving to Oahu soon. So island fever is probably not going to be a big issue.

    We're already handyman (and woman), we 're hands on and practiced at it. We're all ready to have our own homestead and we think Hawaii would be great.

    So, did Obamacare help you guys out with health care?

  2. Welcome! Caretaking exists here in Hawaii too, but it can be difficult to make the connections. So most people buy their own land then develop it.

    Obamacare? It didn't help us, personally. It caused our premiums to dramatically increase and our coverage to shrink. My mothers premium doubled!