What We Do With Leftover Money

All the bills are budgeted, all the expenses are taken care of and all of the savings goals have been rationed out for the month...and there's money left over. Now what?

We've been working hard for three and a half years to get to our current financial position (no debt with a completed emergency fund), and, to be honest, I thought by now we'd have lots of extra money left over. That is certainly not the case.

Sometimes it's disappointing to see the number at the bottom of the budget (the "leftovers"). The money just doesn't go as far anymore, and doesn't feel as good. It's weird. Our budget is tight, yet we are at such a good place. How can this be? Well, there are many reasons why the number seems small (lately, not more than $100):

Why We Don't Have Much Left Over

  • Increased retirement investing: Since we reached our emergency fund goal of six months of expenses, we've started investing heavily into our retirement accounts. In addition to maxing out our employer retirement matches, we're also contributing an extra $200 per month to personal IRAs.
  • College savings: We've just decided on an Educational Savings Account (ESA) for Rooney. Currently we're putting in $100 a month. (A follow-up post is coming soon on college savings.)
  • Rooney costs money: I've heard Dave Ramsey say that kids aren't that expensive, but I have to respectfully disagree. We are very blessed in the amount of clothing and baby gear that has been handed down to us, and Rooney still costs us $1,153 per month.

After budgeting our way through the above items, among the fact that our income is fairly fixed at this point, there simply hasn't been a whole lot left over each month. Nothing like pre-baby when we had just paid off our last debt and had an extra $1,200+ leftover every month. That was awesome!

What Happens to the Leftovers?

Once we get down to the bottom of the budget and have attempted to account for all our expenses in the upcoming month, we apply the leftover money toward one or more goals. Currently, we divide the leftovers by four and they go toward the following (25% each):

  • Mortgage principal: We can't wait for the day we pay off our mortgage! It's going to be amazing, but it's also going to be a long road. For now, we're just barely chipping away at it every month...
  • Car replacement: Cars don't last forever, and we've neglected saving up for cars in the past. We're not in need of a new vehicle currently, but we know that in the next few years we probably will be (this is separate from our car maintenance budget).
  • College savings: Again, we budget $100 per month currently, and then add 25% of our leftover money to the college fund as well.
  • FUN MONEY: Yep, we capitalize it. It's kind of our pseudo-motivation to try to keep our other expenses low throughout the month. FUN MONEY gets spent on whatever we want.

Right now we only have $35 in FUN MONEY. Sometimes it gets spent on completely random things or things we forget to budget for (our Oops category). In the past we've used it to buy some things for our home that we wanted but didn't have budgeted, and also sugary treats on vacation when we ran out of cash. But in the future, we're trying to grow the FUN MONEY category for something big.

However, it's been hard, because we haven't named the money. We need to be more specific. FUN MONEY is just too broad. It's like a parking lot for the money, but we'd like to be more intentional and save up and buy something on our someday/maybe list.

Maybe we'll have to add some of our someday/maybe dream items (finish our basement, paint the walls white) to the budget and save a little every month for them, and allow ourselves the ability to shift those funds as we want. (We're so indecisive sometimes.)

How do you make the most out of your leftover money? What financial goals are you working toward?