Budgeting Part I

I am always trying to get better at sticking to our budget, who isn’t? I think living in California keeps me mindful of expenses and trying to save. I know that when we have kids one day, I will want to teach them how to be good with their money and not take it anything they have for granted.  So I need to start working harder at being a penny pincher, but at the same time enjoying life.

Hubby and I have been blessed to have never have fought over money, due to the fact that Hubby handles all the finances and I trust him. I know I am not the best with money, so I let him do all the math.  I really want to be more involved with the budget so I can help save more and to be aware of where our finances are.

I have heard so many different tips on ways to save and recently have been really drawn to Dave Ramsey’s idea of the Envelope System. Hubby and I don’t use credit cards so his idea seems the most useful. I am a very visual person so seeing the cash dwindle down is good for me.

So, what is this idea?

1. Budget each paycheck. Budget is a dirty word to most people, but you must budget down to the last dime if you’re going to successfully implement the envelope system.
2. Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system, like bills paid by check or automatic withdraw. However, you can create categories like food, gas, clothing and entertainment.
3. Fill ‘er Up. After you’ve categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.
4. When it’s gone, it’s gone. Once you’ve spent all the money in a given envelope, you’re done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can’t spend any more on clothes until you budget for that category again. That means no visits to the ATM to withdraw more money!
5. Don’t be tempted. While debit cards can’t get you directly into debt, if used carelessly, they can cause you to over-spend. There’s something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you’ll be less likely to over-spend or buy on impulse.
6. Give it time. It will take a few months to perfect your envelope system. Don’t give up after a month or two if it’s not clicking. You’ll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth, and achieve financial peace! See … simple!

Certainly, some bills may come in at different times of the month, so you’ll need to adjust your written game plan to take it one step further. You need to plan the budget based upon your pay periods. Say that you get paid twice a month. If you can write down which bills you plan on paying from each paycheck, you will not be left with a surprise bill. Spend each month’s income and each individual paycheck on paper before it comes in.

-Taken from Dave Ramsey’s Site

So basically Hubby has given me several different envelopes filled with cash for the week’s budgeted items and that’s all I get. Of course I do have my debit card close by in case of an emergency. I think of the cash in each envelope sort of like a challenge. If I don’t use all the cash in the envelope then it just goes right back into savings!! I am not sure how well this will work, but I am up for anything.

Question: How good are you with your finances, are you a penny pincher or a spender?? Do you have some budgeting tips you would like to share? Please email me with your ideas!