Friday, November 15, 2013

How to Make and Stick to a Budget

This is our budget book.  We've been using it for 15 months with great success.

I often tell you about the budget meetings my husband and I have in my Ways I Saved posts, and I wanted to share with you our budgeting method.  I also thought it would be helpful to give you some insights to the manner in which we live and how we came to this point.

When my husband and I first got married, we were both in school and working.  When I look back, I think it was insanity.  I commuted roughly 1 hour each way to and from my university and I rarely saw my husband more than 1 hour a night before I crashed and went to bed at 9:00 p.m.  I'd wake up at 4:00 a.m. and do it again the next day, while he stayed in town and worked full time and went to evening classes.

During this time, I realized how little money we truly had and I found all kinds of crazy budgeting websites.  Get rich quick never sat well with me, and the "write down all of your dreams and save money for them so you can do them" sounds great, but it wasn't very satisfying because we made so little money and realized very few of our dreams.  I would tell my husband ALL of these wonderful and not-so-wonderful ideas and overwhelm him with all of the things I wanted to do with our very humble earnings.  To sum it up:  We were NOT on the same page.  I wasn't even on the same page with myself!

After several years of just trying to live frugally and not really getting anywhere either good or bad, some of our dear friends told us about Dave Ramsey.  Dave Ramsey's plan is quite solid and has worked well for us, though we don't do everything exactly as he suggests.

I'd like to say that as soon as we found Dave Ramsey, that all of the financial turmoil ended, but that's not so.  It just made things easier than they would have been without his plan.  Out of the last nine years that we have been married, the last few months are the most financially successful months we've ever had.  We haven't had to worry so much, and we've been able to do some things for our home that we have not had money for previously in our marriage.  We are able to do these things because we are getting out of debt and slowly have more and more excess.  My husband's career is not one that societal standards would consider us to ever be wealthy or close to it, however, we feel confident that as we get out of debt, we will be able to do those things that we want to do.  Even if it takes a little longer than another person.  We feel very grateful for his wonderful job.

You may wonder in my Ways I Saved posts, "How is she saving if she is spending so much and buying so many things?"  I will tell you, I sometimes feel guilty after we do something nice for our home or selves because it's always been such a struggle in the past.  However, it is nice to be able to work on our debt and work on having a nice home.  Our current home is quite modest.  It will be nice to purchase a home someday, and put beautiful things in it that we carefully chose and purchased for good prices.

On to the actual budget and away from the history!

We have tried a lot of things throughout our marriage.  Goal lists (too vague and slow gratification), Excel spreadsheets (out of sight, out of mind), Quicken (the same as Excel.  I'm too lazy to get on the computer to notate every expense), Cash Envelope Systems (part of me likes the cash envelope system, part of me doesn't.  In the end, we've abandoned it due to too many categories in our budget), etc., etc., etc..  We have finally found what works for us in regards to the bookkeeping aspect of budgeting.  And it's simple.

We use a composition book to keep track of our total budget and a mini composition book to keep track of individual transactions and withdrawals from the categories of the budget.  That's it!

Let me take you through our budget book.

1.  I estimate my husband's income, so that I can plan for the month, but we adjust according to what money actually comes in.

2.  Write down your estimated expenses.  ALL of them!

TIPS:  Start your budget a week or two before the actual month in which it will be used.  Estimate high on things like utilities so that you are pleasantly surprised when they are lower than what you had assumed they would be.  If you work on your budget early, you probably won't blow through any excess you might get, and you can be more prepared and make cuts if your earnings are low.

Also, this is the time to determine whether any festivities, clothing, or any other non-repeating expenses need to be added in to the budget.

3.  Subtract the expenses from your earnings.  If you have excess, put it toward debt, savings, whatever you need.  We do our budget in a "Budget the money to $0" sort of fashion.  If you are short, you'll need to make adjustments to your budget.

4.  As your bills begin coming and once the money has left your bank account, mark the items as paid.  We very simply notate it to the left of the budget item.  If our monthly expenses have come out very differently, I might even write up a new one and write it as "Revised" so that I can compare it to the original.

Also, watch your bank account to make sure the correct amounts of money have been withdrawn.

5.  As some budget categories come in more or less than what you had calculated, cross the old total out and write in the new amount.  This is usually where you are happy that you budgeted high.  For example, my electric bill was $8 less than I thought it would be this month.  Woohoo!

6.  Determine what to do with any excess you may have from expenses coming through less expensive than you had thought.  Notate what it will go to.  TIP:  Sometimes we don't pay that excess to the category we decide on until the end of the month.  You never know what may happen.  We usually like to keep our Emergency Fund (Dave Ramsey suggests between $500-$1000) for those surprises, but I don't really like touching it if it just turns out that we need an extra $20 for this or that.  You could always leave some flexible money in your bank account, but that's up to you.

7.  DISCUSS, DISCUSS, DISCUSS!  Don't be long-winded if your spouse doesn't handle budgeting well, but a weekly budget meeting does wonders.  Especially if you have goals.  You can look at your budget book frequently and see what progress is being made, or pull in the reins before ruination has been inflicted.  My spouse doesn't really like writing up the budget too much.  I don't like it when he's not involved.  So!  I draw up the budgets, allot the money, then we discuss it.  I make him take a look at my math!  I simply don't want to be solely responsible for that.  Once we've discussed and agreed, we're done and we put the big budget book away.

The Mini Budget Book:

We use a mini composition book (I bought a three-pack at the Dollar Tree for $1 last week) to keep track of any categories of the budget that will have more than one withdrawal.  For example, the grocery, gasoline, and fun money categories.

We moved away from the cash envelopes last month and we are really enjoying this.  It seemed that if we didn't get the exact amount of cash for every category right from the start, money would begin to be withdrawn, but without us really knowing what was going where and how much money was still left in a budget and the question, "How much is left in X category?" was constantly being asked.  I also didn't like being responsible for all of that cash, and I wanted to be able to use my Target Red (debit) card without having to go put money back into the bank.  Lastly, it's night to be able to pay for several things in one transaction at the store, then divide them up in the mini composition book from looking at the receipt.

Here's what the inside looks like:

1.  Write in the Category and money allotted.  Each category should probably get its own page.

2.  As you spend money on items in these categories, notate with a subtraction sign and the dollar amount.  Occasionally write in the new total that you have to spend.

3.  Keep this book with you in your purse or car so that you can fill it in while you're out shopping.  Let your family members know when the money is gone from a category.  This may be easier said than done, but it is important for them to know.

If family members don't like budgeting at all, kindly and lovingly express its importance to you.  Write up a budget anyway and ask if they'd like to see it.  Quickly show them the path to freedom, achievements that could be had.  Whatever you do, other than possibly some fun money (which I believe is very healthy if you can afford it), DO NOT SPEND MONEY THAT YOU CANNOT AFFORD.  It will not help your goals to say, "Well, S/He spent $X, so I'M going to spend that much too!"  I even believe that kindly and lovingly expressing your disappointment or discouragement is ok if it's becoming a serious problem.  The thing is, it has to be LOVING and KIND.  In this way, you can be true to yourself and your financial obligations.  Obviously, I don't know you or your situation, so take this paragraph with a grain of salt.

We have so much work left, but we've had great success this way.  We're continuing on our path to "Financial Freedom" and it feels good.  A good motivator is to look at the budget and imagine how much excess we would have if we didn't have to pay those debts.  Try it and you'll see!

How do you keep your budget?  Any tips you'd like to add?


  1. We don't budget because basically we seldom spend money. It's hard to explain. We're older than you , we were raised by parents who grew up during the Depression and besides that came from very frugal ,missionaries, people used to making do.

    I can do like Brandy and go for weeks without needing to buy things. But unlike their situation we have savings and I have a steady albeit small income. Husband is self employed so we always live to the lowest amount possible. We have a water bills. We garden...So no expensive organic veggies to buy. I can just about everything possible and cook 99% from.scratch.

    I just read the average woman spends $700+ on just her hair in one year. I have not spent that in a lifetime. I have never even had my hair done once in a beauty salon. We don't have cable though we do have an old tv that works off an antenna. So we get 5 channels, I think. We drive old vehicles that my husband has maintained for years. My present car is 10 years old and the one before that is now 26 yr old and has 250,000+ miles on it. It is still usable though we keep it in a shed and just lend it out to visiting missionaries now.

    So it's not like we suddenly have to start cutting back, cutting out luxuries etc or work to get out is a debt we never got into. Sorry this didn't really answer your questions and is obviously no help.

  2. Thanks Athanasia! Living frugally IS budgeting! Just a different kind, in my opinion! Thanks for sharing your lifestyle.

    $700 on hair! That's quite a bit! I spend $20 on a haircut 2-4 times a year, and I use coupons to purchase all of our hair care and styling items. I used to trim my own bangs and hair, but I didn't have good scissors and it was difficult to do. I should try again, now that I've invested in better scissors. I cut my kid's hair, and my husband gets his hair professionally cut at an inexpensive place. I wish he'd let me try cutting it once! He loves my son's haircuts, but I don't think he's willing to risk it on his own hair. LOL!! That's ok.

    I wish we had never gotten into debt, but most of it was necessary. We're working on it and there's a light at the end of the tunnel!