A reader asked...

I got a question from Amy yesterday...

You talk about your budget. I'm always trying to stay on a budget but never seem to find a good way to set one up. How did you develop yours?

Thanks for asking Amy! Here is what I have found that works for us.

I started using a expandable 13 file folder for bills last year and I love it. It is compact, portable and easy to store.

Here is a picture of ours for this year. Each file is for one month...


Each month, when the bills are paid, I put the copy of the bill marked paid with the check number and date. Any unexpected bills that come in (doctors) get placed in the following months file. (Bills that come in February get placed in the March file. This will make sense, stick with me.)

But how do I figure out what gets paid when?

This is where the budget comes in. I use Dave Ramsey's budget software. I bought it mid-December and started January 1. Between this and the envelope system, our budget has drastically changed....for the good!

At the end of the month, I get our folder, my calendar, a calculator, the laptop and a pen. The budget software allows me to type in what I expect Jeremy and I to make during the month and what bills we have going out. This is when you would pull out all of those bills that came in the mail. You should know when all your other payments are due...utilities, car payments, rent/mortgage, phone, etc. I also plan for any haircuts we may need, medicines, oil changes... Try your hardest to spend every dime on paper before the month starts.

Once I have the budget done, I tell Jeremy it is time to go over it. I run through it with him and add anything he may need. We finalize it and that is that.

Dave's software also includes an 'Allocated Spending Plan'. This allows you to enter and plan where each paycheck is going. Every Friday in my calendar shows what I am doing with that check. I fill out the budget portion of my calendar at the same time I do my budget. I only deposit what I know I will be paying for with a check that week. That way, I know that we cannot use the debit card or write checks. Any leftover cash gets sorted into envelopes which I also plan every Friday.

This is the envelope system we use and it has changed the way we live and spend money.

I have it divided into five categories: Grocery, Eating Out, Blow Money, Entertainment, Gas

The hardest part I had figuring out with the envelope system is that they may have never be "Fully Funded". With our first check, I put ALL of our grocery money in it's and then fill the rest with what I can to get is through the next pay date. It seems to have helped a lot doing it this way instead of stressing because we never had ALL of our envelopes completely full.

Make sense?

I tired to explain this the best way I could....email me or leave me a comment if you have questions!