Dave Ramsey had a very simple way of explaining how to budget. You can find his website by clicking on his name.
Here is an excerpt from his website:
- Budget each paycheck.
- Divide and conquer.
- Fill 'er Up.
- When it's gone, it's gone.
- Don't be tempted.
- Give it time.
Our family envelopes are: Food, Clothing, Bills, Miscellaneous, Savings and Kids. I also write the date and how much money goes in the envelope. When I take money out, I used a preassigned color and subtract that from the total. This way I always have a running total of what is in there at all times.
Food- in this envelope I also add my coupons and my lists. This way when I go shopping everything is all in one place. Now, Dave Ramsey, doesn't believe in debit cards/credit cards. This is where he and I differ. If I am able to save more money by using my card, I am going to. When I shop at Target for example, I use my reusable bags and earn money off for using them and also use my Target card. I usually know exactly what my budget and bill are, so then after I check out, I walk right over to customer service and pay the bill. Usually, I know exactly what I want and when, if I am buying something say in the clothing category, I make a separate transaction. I know it sounds silly but this way it helps me stay balanced.
Last week, I went shopping at Target:
We bought yogurt, bread, Bisquick, Popsicles, chicken, hot dogs, juice. Just stocking up on our items. Using coupons, we paid $8.56. We also bought a robe for peanut, a shirt and a package of underwear. This came to another $5.25. This came from the clothing envelope. The last few items came from our miscellaneous envelope, I picked up a new bottle for syrup, and a new muffin tray. This came to $ 6.28. When I went to the counter, I took the money out of the food envelope (as that one the one in which I spend the most), then when I got home, I transferred the money back to the appropriate envelopes. The did check out separately, this way I knew what the balance of each folder should be. I also had a receipt to put i each folder to keep track of everything.
With our miscellaneous folder, this is where it gets a little tricky, I have a wish list for things for my house, things I want to make my life easier. When items go on sale, I can use the money from the misc. folder and get the things, I want. This way, I don't break the budget and we get it as we need it. This really helps us to save money.
My wish list right now:
glass storage for kitchen
new hamper for master bedroom
New frames for hallway artwork
Clothing: is pretty self explanatory: diapers also come out of this envelope. If Pumpkin needs a new diaper or inserts. (Although, I am happy to say that she is only using diapers at night time!)
Kids envelope: is all of the fun stuff that we do.: Anything that is extra, school pictures, field trips, Santa Letters, Halloween costumes. All of this money actually comes from part of my tax refund. Whatever money is leftover at the end of the year, just stays in the envelope to roll over to the next year.
The savings folder, actually has mini folders inside of it. The mini envelopes are for our savings account, emergencies, household repairs, and car.
At the end of the month, whatever money is left over in the clothing and bills folders, gets transferred to a savings folder: usually the car one, yes we are saving for a car and hope with our trade-in and savings to pay for it in cash.
The Last step of the envelope system, or at least my version of the envelope system is to upload all of the receipts and bills into our online budgeting system. I do this for two reasons, one, it makes it easier to prepare our taxes, and helps to make sure that we are on track with our budget.