Tuesday, January 03, 2006

Back To Budgeting

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Have you written your January budget yet? Nope, neither have I.

It's a little known secret among frugal people that one's monthly budget--and the will to save--is rarely set in stone.

As my family's spending manager, I need constant retooling and reinforcement. After all, the weakness of a budget is not on the paper, but in the human being carrying out the plan!

So get out your envelopes and calculators--here, for my own benefit (and maybe yours), let's review some budgeting basics.

1. Spend cash for all purchases. Mark an envelope for each category and put your stated allowance in each envelope. Spending cash hurts.

2. Keep track of every penny you spend, either in a small notebook or on your envelopes if you are doing the cash system.

3. Save all receipts and bill payment slips so you can total your spending at the end of the month and use this information to retool next month's plan.

Focus on tracking your money, not saving it.

Even if your paper budget reflects your current spending level, you will probably save money just by becoming aware of what you buy. Don't worry about developing a sophisticated computer spreadsheet unless you really want to.

In my case, transferring figures to Quicken was my downfall--now I use a paper planner with a pocket for each month. I put each bill as it is paid and throw in my receipts from various envelopes at the end of the month. At the end of the year I review totals on Quicken, but I no longer let monthly spreadsheet guilt slow me down.

Above you will see my envelope binder from Dave Ramsey's Financial Peace University--I was tickled to find this (unused) at a yard sale, so I could quit using bank envelopes to separate my cash.

The side bonus of the envelope system is that you'll never have to hunt for a crumpled receipt again!


Mrs.Garcia said...

Meredith, Thank you for the reminder that I need to work on a budget and have a budget written out for my Family.

Anonymous said...

I have a question about the envelopes. Do you split up food and such necessities as toilet paper? If you buy them at the same store do you take money out of both envelopes to pay? I've tried the envelope thing before but this always trips me up.

Meredith said...

Lulu, I use the same envelope for everything I might buy at a Kroger or Walmart type store--all household things which need to be replenished, even down to vacuum bags. I currently budget $50 per week, or $200 per month, toward this category. Some weeks I don't spend it all, but others I might find a great sale and stock up for my pantry. It evens out in the end! Whatever doesn't get spent rolls over into the next month's envelope.

Meredith said...

Mrs. dmg, I don't have much that rolls over, either. The one exception is the gift envelope. Because I buy gifts throughout the year, both for birthdays and for Christmas, I try to put $30 a month in that category. Some months I just don't spend it, and it rolls over (hopefully to another month when I hit a gigantic clearance sale!).

Meredith said...

Ps--I think you're right about pretty planners! This one was only 59 cents at a thrift store!

Anonymous said...

For the envelopes--couldn't you also use one of those small portable filing doodads--I think they have rubberbands around them. You could label each section individually and keep all cash together. It'd eliminate all the envelopes everywhere. Hmmm....think I may try this. ;)