June~the month of changes. A few steps to our budget.
by, 05-28-2009 at 10:26 AM (1803 Views)
Okay, for those of you who read my blog already know that in the past few weeks there have been some difficulties with our finances.
I have been working diligently over the past couple of weeks trying to get things in order:
a new budget
using an envelope system
figuring out pay-off dates, etc.
So, beginning in June will be when all of these new changes will go into effect.
I thought I'd post here about each one, so that I can stay accountable to myself & for anyone else who might be wanting to turn their finances around but just aren't sure, with all the information out there, as to where to start and would like a KISS (Keep It Simple Sweetie) system.
I don't do spreadsheets, so if that's the information you need, don't read any further.
I'm a basic notebook & pencil person (notice I said pencil, 'cause I've been doing alot of erasing the past few weeks).
As most people already recommend:
1~Spend a weekend (not the entire weekend, or at least I hope not) getting together all of your totals.
This is the 'bugeting phase'.
Right now, we're just looking for monthly payments, not interest rates or balances.
2~Write everything down onto a sheet of paper:
Star Card~$140.00, etc.
3~NOW, we want to go through all of our accounts and find exactly what we owe on each account.
This sometimes is the emotional step alot of people get stuck on.
These are just numbers, write them down and move on.
4~Now you need to write down all of your other expenses:
Go with a rough estimate, but always estimate on the higher side. It will come in handy later on.
5~Add everything up and deduct it from what you make each month.
**But whatever you do, do not forget to put away some money into a savings/emergeny fund, 'no-touch' fund, etc.
But you need some money each month going into some type of savings fund.
This has also been a down fall of mine in the past, but no more!**
Stop work on your budget at this point, you will see why in step #6.
Take a week off and plan on using a couple of hours during the next weekend.
This serves two purposes:
It will give you a chance to take a step back and take in all of your totals.
It will also give your mind a break from crunching all of these numbers.
6~Now that you've taken a week off, we start with step 6.
This is where it gets sticky.
If your seeing red, after figuring everything up from last weekend, then you have to go back and redo some numbers.
This is where the 'estimating higher' comes into play.
Everything, I mean, everything has to balance out.
Even if that means taking an extra $75.00 from your grocery budget to get the electricity paid.
This may take you more than a couple of hours, you might even want to break it up into a couple of different afternoons.
The point to this is, you don't want to get too overwhelmed.
This is where I've usually lost my momentum before & decided to give up before I even finished.
A budget is crucial, so don't let this step get the better of you.
Stay with it, even if it takes working on it over a 2 week period.
You *have* to have a budget.
I was always of the mindset that budgets don't matter.
So don't fool yourself.
For myself this was the hardest part of the equation.
Getting everything to balance out.
But once your past this part, it will get easier.
7~Now we have our budget in place, every dollar you bring it should go somewhere.
There are several quotes out there that mention every dollar should be working towards something.
Whether this is for your weekly gas for your car or for that new pair of curtains for your bedroom (this for me, falls under 'home projects').
8~Okay in this step, you need to figure out which system will be easiest to work with.
I think it should be figured out on a family by family basis.
What I mean is, some people like the cash only system. Otherwise known as the envelope system.
Which incidentally is what we will begin implementing come June.
Some people have automatic payments that come out for certain expenses, and some people write checks for the neccesary monthly expenses & then use their debit cards for other expenses.
I've found most people use a variety of different systems that work for them, so experiment a bit and find out what works best for you & your family.
9~Remember to allow yourself at least a 2 month trial run of your budget and spending system.
Tweak it as you go, change things as needed.
You have to personalize your family's spending/saving plan to whatever works best for you.
So don't be afraid to drop something that doesn't work or even add something that might work better for you.
I know some people give their husbands 'allowances' each week. I personally don't like this idea because I feel like it puts more power into my hands, so to speak, than it does my husbands.
We are equal now when it comes to our finances, whether it be paying off a bill or budgeting for an upcoming expense.
If he needs money, he knows it's his responsibility to check our budget (well, in our case, the envelope) to see if that extra money is there.
10~I will cover this step in another thread. This is setting up a pay-off schedule for any debts that might be owed.
But for now, as long as you are not behind on any payments, continue to make your monthly payments.
I feel like this category needs to be addressed in it's own post because it's a bit more complicated.
I just wanted to let you know that I did not forget this critical step.
And seriously, haven't we already done enough work already??
Now, for a couple of personal notes.
The categories that I've used for our personal envelope system are:
4~School (This is for anything related to school for the kids, such as yearbooks for the upcoming year, book fees, club fees, etc.)
6~Home Projects (This includes new paint, new curtains, rental of a steam cleaner to clean the carpets. You name it, if it has to do with the house, it goes here)
Right now we do not have a Misc. envelope, but in the future I do plan on implementing one.
But for now, these are the categories that we spend the most on and the ones that need to be addressed.
Now, I know alot of you are looking at our list and seeing that I did not include any of the necessities, except for groceries.
The necessities will all be covered by money left in the bank.
So you can see we are using a modified envelope system.
The categories that we choose to use an envelope system for, are the ones that have the most 'wiggle room' and we felt like we needed to have a more strict system in place for them.
The first week of the month is when most of our money comes in, so this is when we will go to the bank and make our withdrawal to fill all of our envelopes.
But the tricky part is, that this money will have to last us through the entire month.
This is something that will be new for all of us because we have always gotten bi-weekly paychecks.
But because of how we are paid now, this is no longer working for us.
I believe that this was also one of Mike's biggest problems with our finances in the past.
He was scheduling payments trying to use our old schedule and it just doesn't work as well anymore with the way we are paid now.
I'm really hoping that this step alone will help to get things back in balance a little better for us.
So when you break it down it looks so daunting, but basically it's just 3 steps:
2~Stay within our budget
3~Utilize an envelope system
I have a feeling that we will go through alot of 'growing pains' over the next few months while we are experimenting with our new system.
But we are motivated enough to get our act together and take over our finances instead of allowing them to take over our lives.
I will come back here throughout the month & try to give some updates and let everyone know how our new system is working for us.