I was writing this elsewhere, but then I thought, they may already know this, and someone else may not, so I figured, its half written up already, I may as well make a new thread of it.
SO here goes. The Envelope system, for beginners. This is how, when your money is out of control, you gain control if it again, one step at a time.
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Start your budget by figuring out every single dollar you HAVE to spend. Put it into categories. Food, utilities, rent, insurance, car payment, minimum payments on debt, everything. How much you MAKE isn't important, its how much you MUST spend. Your first pass will be wrong, but do it anyway. Next month, you'll improve it.
Write down each category on a page, with the minimum you must spend in a column net to the category name.
Now, on a new page, write down the same info, but in priority order. Your tip 5 priorities are:
1) FOOD
2) RENT
3) UTILITIES
4) INSURANCE
5) CAR PAYMENT
After that, go in priority order based on what you Must have to survive at the top, down to what you owe other people at the bottom. DEBT LAST and to hell with the creditors thinking they come first.
On this page, leave room for a 3rd column.
Now, when you get paid, work down the page from top to bottom, and in column three, spend every dollar you got paid until there's no money left. Thats where your money goes. When you get paid again, go back and update the numbers.
Cash your checks, for now, don't leave the money in the bank or it will fly away from you, because right now you're NOT in control of your money. (Sorry) Instead, make an envelope for every item, and put the money in it based on the budget, from top to bottom, as the money comes in.
So for food as an example, say you need $200/month. You get paid $75.00 one week. Put a $75 in the allocated column:
Put $75 in the envelope. Use that envelope and ONLY that envelope for food.
Now next week you get paid $250. Add $125 to food, and $125 to rent.
We've increased food to its max budgeted amount and started putting money in the next column.
Put $125 in each envelope. DO NOT PUT ANY MORE MONEY IN THE FOOD ENVELOPE THIS MONTH. Spend the money from that envelope for food, and only that money. If you absolutely MUST spend more than you allowed for, say, food, then increase the food budget, but leave it increased going forward. Like I said, you'll start off with wrong numbers, but in 2-3 months, you'll nail it down.
Continue this way, and review the budgeted numbers every 2 weeks, and update the allocated column every time money comes in.
At the end of the month, do a new sheet for August, and start over. If there is money left over at the end of July, pay down debt with it. Do not carry it over to next month. If you run out of debt, then you have a small party.
This is just the basics, but I hope they are useful to someone.
SO here goes. The Envelope system, for beginners. This is how, when your money is out of control, you gain control if it again, one step at a time.
--------------------
Start your budget by figuring out every single dollar you HAVE to spend. Put it into categories. Food, utilities, rent, insurance, car payment, minimum payments on debt, everything. How much you MAKE isn't important, its how much you MUST spend. Your first pass will be wrong, but do it anyway. Next month, you'll improve it.
Write down each category on a page, with the minimum you must spend in a column net to the category name.
Now, on a new page, write down the same info, but in priority order. Your tip 5 priorities are:
1) FOOD
2) RENT
3) UTILITIES
4) INSURANCE
5) CAR PAYMENT
After that, go in priority order based on what you Must have to survive at the top, down to what you owe other people at the bottom. DEBT LAST and to hell with the creditors thinking they come first.
On this page, leave room for a 3rd column.
Now, when you get paid, work down the page from top to bottom, and in column three, spend every dollar you got paid until there's no money left. Thats where your money goes. When you get paid again, go back and update the numbers.
Cash your checks, for now, don't leave the money in the bank or it will fly away from you, because right now you're NOT in control of your money. (Sorry) Instead, make an envelope for every item, and put the money in it based on the budget, from top to bottom, as the money comes in.
So for food as an example, say you need $200/month. You get paid $75.00 one week. Put a $75 in the allocated column:
Code:
Budget, July 2007
CATEGORY BUDGET ALLOCATED
---------- ------- ------------
FOOD $200 $75
RENT $500 ---
UTILS $300 ---
and so on...
Now next week you get paid $250. Add $125 to food, and $125 to rent.
Code:
Budget, July 2007
CATEGORY BUDGET ALLOCATED
---------- ------- ------------
FOOD $200 $XX $200
RENT $500 $125
UTILS $300 ---
Put $125 in each envelope. DO NOT PUT ANY MORE MONEY IN THE FOOD ENVELOPE THIS MONTH. Spend the money from that envelope for food, and only that money. If you absolutely MUST spend more than you allowed for, say, food, then increase the food budget, but leave it increased going forward. Like I said, you'll start off with wrong numbers, but in 2-3 months, you'll nail it down.
Continue this way, and review the budgeted numbers every 2 weeks, and update the allocated column every time money comes in.
At the end of the month, do a new sheet for August, and start over. If there is money left over at the end of July, pay down debt with it. Do not carry it over to next month. If you run out of debt, then you have a small party.
This is just the basics, but I hope they are useful to someone.