Friday, July 16, 2010


A few weeks ago I talked about being aware of what you are spending. This is an important first step toward getting on a budget. None of us like having to be on a budget. But, the reality is that we won’t get anywhere, financially, until we learn to live on a budget.

Before my husband and I got married, we sat down to set up a budget for him. At that point he never really knew how much money he had or how much he was spending. And he used a “rounding off” method in his checkbook so it couldn’t even be balanced! For an ex-banker, like myself, that was a nightmare! He was not very happy when he saw that he had less than $20 a month left over (maybe it was even less), but after a few months he started realizing that he was getting things paid off and it was actually easier to know exactly where he was at.

So, how do you set up a budget? It’s really pretty simple. Start with making a list of your routine monthly bills. You should note when each bill is to be paid and approximately how much it usually is. Then take a look at your pay schedule to determine which bills have to be paid out of each paycheck. Obviously, if you get paid once a month this is easier because everything has to be paid out of that one paycheck. However, most people get paid at least twice per month. Once the basic bills are done, think about the expenses you have to pay less often than once a month – things such as haircuts, insurance, car maintenance, etc. Then average out how much to set aside each month. For example, if you car insurance is $300 every six months, then you need to set aside $50 a month so you will have the money when the bill arrives. Be sure to figure in expenses paid in cash as well, such as groceries, gas, etc.

Once this is all done, I strongly suggest using some form of the “envelope” system. If you are not familiar with the envelope system, the basic idea is that you would have an envelope for each budget category and actually put the budgeted amount of cash in the envelope until the bill is paid. However, few of us pay our bills in cash any more, and even fewer probably want to retain larger amounts of cash at home. Therefore there are several ways you can do this. Personally, many years ago we found a computer program called Money Matters, which has worked wonderfully for us. I’m not sure if you can even still purchase this program. Another option is to simply have a savings account and some form of a spreadsheet with the various categories listed out and use that as your savings ledger. Before the age of computers, I used to use accounting ledger paper (yes, I’m showing my age here! LOL). The key is to keep track of how much money you have available in each category at any given moment.

Now, are you ready for the real secret??? STICK TO THE BUDGET! It’s that simple. It’s not easy, but it is a simple process. For an online tool to help you out, try Budget 5000. I have not tried this, but found it while searching for tools to help you out. It’s a free service that looks pretty good. You can find it here.

Good luck on your budgeting journey! You can do it!

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