Budgeting Advice

[whodunit]

We're possibly going to try to loosely follow Dave Ramsey's method of money management and there's something I'm not sure about.

Does he advocate putting together a monthly budget ahead of time or every month sitting down and deciding where the money goes? They are two different things in my mind.

If it's a monthly budget do I use what I know I bring home every two weeks, or do I figure in paid holidays that come up through the year, then spread that out into the twelve months?

If it's an every month thing, how do you figure it when you get paid every two weeks or even every week with differing amounts?

[Callieslamb]

Yes, DR is a strong advocate of a BUDGET. If you don't have one, you don't know where your money is going. Say the word 'budget' and people immediately think you are poor because you "have to live on one". In reality the opposite is true - a budget is supposed to work for you and help you control your money.

Set your budget according to your lifestyle. If you are more comfy with a montly budget- do that. If you'd rather do 2 weeks - try that one. If you work one up and it doesn't do what you need it to do - do a different one. It isn't what someone else foists upon you. DH is salaried so we do a budget for the whole year and don't usually have to revisit it each month (especially since we have had a budget for years and years). DH does keep track of any budget line-items that we consitently go over or under on. We do go back and look at that one to see if we need to strengthen our 'no' muscles or add more money in that expense category/switch things around a bit.

Bills are monthly, that's why many budget by the month. We only use what we know we get each month - any extra pay is just that - extra. We know ahead of time that it's coming and we plan accordingly. Or use it for "fun" money. If you need the extra to meet your bills, then I would include it in my budget.

[whodunit]

I think the easiest thing to wrap my head around is one actual bank account with all the individual budget lines listed on paper. Then each check we "deposit" half of what is needed into each budget line. If, for some reason we get ahead in a line (over-budget or whatever) we can "transfer" that money to a line that needs beefing up.

Another idea was to not even bother with lines of things we absolutely have to pay each and are always (or nearly always the same). Things like mortgage, cell phones, internet, etc., are always the same, so what would be the point of having a line for them? They have to be paid regardless of whether we have the money actually listed in that line.

Does any of this make sense?

[Shrek]

Budgets have always been a way of life for me. My parents first taught me to budget for the coming 12 months on a monthly schedule and the coming 5 years on a yearly general schedule and I have lived on one of my own for over 30 years. I am not a multimillionaire but I do have a house and a few acres paid for for over 20 years now and keep beans or stew in the slow cooker and my critters live a better life than I do.

Overall I am very happy with how it has worked.


A first step to effective budgeting is to carry a memo book and pencil with you for a month and if you spend anything, write it down. Its amazing how much money is burned on unneccesary candy bars and such and often that burned money can be factored into wiggle room of the yearly general budget to come.

[Ann-NWIowa]

I advise clients to base their budget on their usual income. Then when you have an extra paycheck, bonus or raise, that money goes into savings. If you are paid bi-weekly then twice a year you will have an extra paycheck in a month. Emergency fund first, then long term and special things like vacations. Don't include the "extra income" in the regular budget or it will get lost.

[SquashNut]

make a list of all of your must pays. subtract that from your income. Then divide the rest between food, clothes, savings, fuel ect.
If you have it allow some for discretionary spending for you, your dh and the home.
Good luck. I have a pretty good idea your going to have to revisit your buget monthly with rising food and fuel prices the way they are.

[whodunit]

Originally Posted by SquashNut

make a list of all of your must pays. subtract that from your income. Then divide the rest between food, clothes, savings, fuel ect.
If you have it allow some for discretionary spending for you, your dh and the home.
Good luck. I have a pretty good idea your going to have to revisit your buget monthly with rising food and fuel prices the way they are.

I'm leaning toward this method. There are things that must be paid, but you are correct; food, savings, clothing, etc. are the big variables.

I can sort of estimate gasoline as far as the trips I take to work and town, but with prices constantly changing it will be difficult. I usually estimate low on MPG and high on the gas price to give some leeway.

[Betho]

I set up a spreadsheet that has a monthly budget but also breaks down which paycheck pays which bills. This is all on the left half. The right half has columns for each paycheck where I put in the actual amount paid, which bills were paid and how much (since they can sometimes vary slightly) and any extra things I had to pay for that aren't line items. It automatically calculates how much is left over and then that amount just goes into savings or paying down whatever.

I think what you do depends on what works for you. He advocates going on a cash-only basis - this would be horrible advice for me to take. If I have cash, it's gone. I can't look at an envelope of cash and know what's in there. If I'm working with my debit card, then I see a visible number with my online banking and I can do the math and know what I have left.

As far as some variables, I keep lots of different accounts. I have an account for gas & car expenses, with insurance and gas card automatically deducted. I have another account where I save up for bimonthly expenses like our power and water bills. I have yet another savings account for general savings, and another one for something in particular we might be saving up for like dental work or car tuneup or something like that.

Not only that, but I have a main checking account, and a grocery/household checking where I transfer the budgeted amount for food and household expenses.

So for me, it works best to budget breaking it down on a monthly basis, and then from there breaking it down even further into what gets taken out of what check. Bills get paid early this way, which is nice, and I always have money for the things I need it for.

I know not everyone would be able to use as many accounts as me, but for me having everything all in one account would get confusing. I wouldn't know how much of the gas budget was left, or how much of the food budget was left, or did I remember to have money saved for the power bill? It's just easier for me this way so I can see at a glance how much we have left for gas, food, etc.

[Danaus29]

I do ours on a monthly basis. I have a calendar that uses 2 pages for each month. Amounts for must-haves are written along with what they are on the date that bill was due the previous month. IE, AT&T due May 7, $27, gets put down for June 7, AT&T $27. Pay dates are circled. Everything due before the week after the next paycheck gets paid first. I can see what bills are coming up and go ahead and write the checks then set them aside until the actual bill comes. One of our must-haves is the allotment for property taxes and home owners insurance. Right now we don't have much in mad-money because we are busting our behinds trying to pay off our only credit card. And dh just lost a couple hundred a pay (bi-weekly) because of cut-backs where he works. My puny paychecks don't even begin to make up for the shortfall so everything is tight, very tight. It doesn't have to be but we want that cc paid off asap.

Dh's paycheck goes in one account. We use it to pay the monthly bills, buy gas and each of us get our little allowance. My paychecks go in another account. That is used for quarterly bills, gardening supplies and clothing. Property tax and insurance money go in another account.

[whodunit]

It's still kind of work-in-progress, but writing down here helps me process things further and might help someone else.

It may seem kind of complicated, but here is what I came up with:

I estimated what we bring in from our numerous jobs even though my second job is sometimes fickle as far as hours. I needed something to shoot for, so I set a minimum of hours I need to work at the second job. This is based on take-home pay, not including holiday pay and overtime.

I then added up what we spend monthly on everything that is "static", i.e. the things that rarely change. Basically, things electric, mortgage, cell phones, internet, life insurance, church giving, Netflix, etc.

Included in the above is this is an estimate on gasoline usage based on estimates of cost, MPG and miles we typically drive in a month. This is kind of a weak point, I think, but it made no sense to me to set a definite amount for gasoline that I was tied down to. If I need to get gasoline to get to work and I've already spent my budgeted amount, what happens then? There is some built-in flexibility here, since when I work at the second job, I stay the night and don't commute that day, so I save there.

I then set some amounts for thrift-shopping, allowances (fun money), restaurants and what I would like to send to savings. All but the savings are cash in envelopes. Once it's gone for the month, it's gone and you have to wait for next month.

The rest of the money is kind of a general fund that covers food; household stuff such toiletries, haircuts, etc.

We keep track of what we spend from the above account. Every month on the first of the month the account is refreshed with the monthly amount. Anything not spent, 25% goes into savings and the rest into a "flex" account which will pay for things not specifically mentioned in other areas- almost like an emergency fund (but we have one of those, too).

In addition to the general account, I have one for cars, vacations, gifts, and home improvement. The only account that gets funded from each check is the one for the cars. This is for paying car insurance (every six months), as well as repairs, oil changes, etc. Anything of an emergency nature (when there is not enough in the account) will have to come from the flex account or the emergency fund.

The vacation, gifts and home improvement accounts get funded solely by extra money that periodically comes in from holiday pay, overtime, extra hours at second job, etc. This is in various percentages to each account.

So essentially, all I really keep definite track of as far as accounts is the general fund, flex, savings, cars, vacations, gifts, and home improvement.

Whenever a get paid (every two weeks) , I send half the specified amount right to savings, half the amount to the cars fund, and fund anything that was over what I expected to be paid into the various other accounts.

After we have gone a few months, I'll get more definite on what we are spending on things and readjust. We use a credit card for the general fund and gasoline (I know, not Ramsey-approved), but we cash back and it makes it easy to see what we are spending every month.

I'm excited about starting this on June1. It's not perfect but at the very least we have a goal to shoot for and a way of at least controlling what we spend in the areas where we can. I'm not interested in keeping ntrack of every penny, I just want to make sure we never go back into debt again and live within our means.