It’s time to check in again with Joe and Josie Jones: our hypothetical average American family as they make it through June with Safe-at-Home orders lifting, adjusting to new income levels, and venturing outside to every park within a 50-mile radius for sanity.
And a brief friendly note before we begin: there is no one-size-fits-all budget, and financial pictures look very different from one family to the next. We’re just giving a made-up example and using the median household income seemed like a nice place to try and do that.
A Quick Recap
In Part 1, Joe and Josie started a budget at the end of April, Joe’s income dropped 30%, they slimmed and trimmed their expenses, and gave three cheers when their $3400 stimulus check hit their bank account. And no small feat—they were able to budget out their expenses through part of June. That felt pretty good.
In Part 2, Joe and Josie used their budget to navigate through May with Joe’s reduced paycheck, Josie’s layoff (and unemployment benefits), and tracking all their spending. Sure, their budget flexed and changed throughout the month, but that is exactly what it should do. And they felt pretty good about that.
Now that we’re at the end of June, it’s time for another check-in.
The June Budget
Here’s a look at the Joneses’ budget on June 1st. Thanks to the stimulus money and a tax return, they had the whole month already budgeted for!
It was just two months ago that they felt in the dark, confused, and stressed about money. And now, looking at all these bright green categories, they felt a happy little spark in their brains—and it definitely wasn’t stress they were feeling.
You can see in some categories there are odd amounts—they had money roll over from last month. At the beginning of June, they’re still in somewhat of survival mode and decided not to budget anything for things like new clothes or vacation right now.
The month goes by, with Joe and Josie checking the budget and spending along the way. It’s like following a map now, where before they felt their spending was just aimless wandering, hoping they were going in the right direction.
Here’s what their budget looks like at the end of June. You can see the middle column called “Activity” shows what they spent.
In the column to the right, you can see some categories are yellow and red. That means they overspent in those categories. Now, overspending is usually dealt with as it happens (called “Rolling with the Punches” and is YNAB’s Rule #3), but we’ve accumulated it here so you could see a clean before/after shot.
Here’s what their budget looked like after they rolled with the punches and moved money to cover overspending.
Now it’s all green! They had extra money from their student loan category (because remember, their federal student loans were just put on automatic forbearance). They used that excess to cover their yellow and red categories.
Credit Card Balance Staying Steady
And what’s more, they’re now a few months into budgeting, and their credit card balance isn’t growing like it used to every month. In fact, it’s staying steady. Sure, they still carry a balance of almost $7K, but all their spending since they started their budget was with dollars they already had. Wow! That felt like a win!
June Cash Inflows: $10,400
Since we last checked in, Joe and Josie had a record-setting batch of inflows. Between May 21 (when we reported last) and June 30, Joe got three paychecks, Josie got backpay for unemployment, and is now getting weekly unemployment benefits. The two brought home $10,420 in that time frame.
(We’re not getting hung up in the politics of unemployment benefits and don’t want you to either…we’re focusing on what’s within their control—and that’s deciding what to do with the money).
Adding more wind to their sails, they spent less than anticipated last month with the help of their shiny new budget. They scooped up the extra money left over in May to add to the money to be budgeted, bringing the total to over $11,000.
So Much Money, But What to Do With It?
This is a very important impasse right here. Remember, these are the same Joneses that were living paycheck to paycheck back in March, and they still very well remember their old spending habits. This budget is really great, but it doesn’t feel quite like an easy, don’t-have-to-think-about-it thing. Plus, an above-ground pool sounds pretty nice right now.
So, with $11,000 burning a hole in their checking account, they have to decide what to do. Let’s take one more look at their current situation:
- They have an emergency fund of $1,700.
- They are budgeted just a little bit into next month, but the whole month is not funded yet.
- They still have almost $60,000 of non-mortgage debt between credit cards, student loans, and car loans (but oh gosh, they still can’t even find the mental space for that yet).
- Their credit card balance is not shrinking, but it’s also not growing!
Oh, and this is the most cash they’ve seen in their account in recent history. It’s got them a little starry eyed. But this is the moment. THIS IS THE BIG MOMENT. They just got a big boost and now they’re deciding if they’re going to make the most of this unusual opportunity.
Will this be their turning point, or is this when they go right back into their old habits? Because again, a pool sounds reallllllly nice right now.
Current Options on the Table
Let’s look at some options what they are thinking about doing:
- Go have lobster and a fancy dinner!! Oh wait…COVID.
- Buy an above-ground pool!
- Buy a boat!
- Buy a new mattress!
- Redecorate the house!
- Put money into a vacation! Somewhere…somehow…
Let’s look at some other options they’re thinking about doing:
- Budget out the rest of July, and maybe into August
- Pay down more on the credit card
- Start building up some of those other “extras” categories
- Build a bigger emergency fund
Also, Josie is getting rumblings that she might be returning to work soon, and Joe is hearing about deeper and more permanent layoffs where he works. To say they’re on steady footings is a wild overstatement. While the options above might be interpreted to some as “good” and “bad,” it’s really about what gives them the outcome they truly value.
And right now, they value stability over anything, so they pursued the route that gave them that feeling of security.
Where the Money Went
Here’s what they did:
- Budgeted through the rest of July and the whole of August. They’ve even got a little money saved to use for September.
- Set up a “Christmas” category to save $500 by Dec 24. This will be the first Christmas they won’t be adding extra debt to their balance.
- Set up a “fund next month” category with a Monthly Goal set to $3700 (which is how much their expenses cost each month). They aren’t ever going back to paycheck to paycheck if they can help it. They’re now a month ahead and want to keep it that way for good.
- They even set aside a little money for the “extras,” including $300 for a camping trip up north to get away this summer (the walls feel like they’re closing in lately). Are we casting judgment for this one? Nope, not at all. They’re making this decision by looking at their priorities and making sure their money lines up, and fresh air for sanity seems like a good thing right now.
Do you see it? Joe and Josie are writing a new money story right at this moment. You’re seeing the first chapter. Whew! How exciting is that!?
Coming Up Next…
Next month, their job situations continue to shift. Josie is still getting unemployment benefits for now, and they’re even thinking about making a plan to pay off their credit card.