WOW- It’s JULY already which means HALF of this year is already gone! My main goal for 2011 was to get a lot stricter with spending in our household and really stick to a budget. Now…by BUDGET, I don’t mean a loose use of the word, I mean a strict list of the amount of money that can be spent in set categories, ON PAPER and tracked with each and every dollar we spend. It’s one thing create one and entirely another to ACTUALLY DO IT !

I’ve written before about the Envelope System, which I still feel is the best way to get total control over your Finances. I started in January by first making the commitment and then getting my system setup.

Here’s a quick rundown of getting setup:

  • CHOOSE A BINDER SYSTEM/ORGANIZER – I used my OfficeMax Perks Rewards (from recycling printer ink) and purchased a Home Finances DayRunner Binder ($0 cost to me w/rewards) This one works well because each month has it’s own pockets to store those bills & receipts, as well as room for notes.
  • ACQUIRE ENVELOPES for Spending Categories – You can grab these at a Dollar Store. Whatever size/type you like – no need to get fancy unless you want to.
  • Pen, Extra Paper & Calculator to keep with your system – should fit neatly into your Binder/Organizer – this just helps to keep everything together so you are focused when you pull it out!

    Once you have your system setup it’s on to the bigger tasks!

    The first step is to Establish your actual Income & Expense Categories.

    This FREE ONLINE CALCULATOR from Crown Financial Ministries is a life saver! If you are meticulous and input exactly the amount of income you are working with, you can see what you SHOULD be spending in each category (Housing, Food, Insurance, etc.)

    Once you have the exact income entered, I recommend PRINTING it out to use as a guide. I adjusted the pre-set categories to meet our needs. I found it very easy to use their recommendations for the suggested % of spending based on income and tweak it to customize for our family.

    Whenever you have calculated your own categories & expenses, you are ready to create your Envelopes.

    On the front of each envelope, write the Category (i.e., housing) AND the amount you have alotted to spend in that category based on the calculator above.

    As the bills come in during the month, I write their amount on the envelope for that category. Same goes for other spending such as eating out, emergencies, etc. Once those amounts meet the amount specified on the front of the envelope, THAT’S IT ! You have to choose to either take money from another category (causing a shortage there instead) or you just can’t spend anymore on the category for the remainder of the month.

    Now – this is easy when you reach a limit for something non-essential such as eating out. What about an unavoidable increase in a category?
    This month we have gone $77.63 OVER what was budgeted for HOUSING. For us, Housing expenses only include our house payment, power bill and water bill. For some reason, our water bill was $77.63 higher than usual, so we are OVER BUDGET

    Because I know that I can Coupon & decrease spending on groceries, I chose to take that $77.63 from the Groceries Category and adjust the spending in that category. This way we stay on budget for the month and don’t pull that amount from saving or other categories I feel are more important.

    As you see, you can always adjust as you need. The point is to track your spending and also be able to see it all on paper. The full amounts of what is coming in and what is going out.

    Before I did this, I knew that we should have EXTRA money leftover every month, but somehow we never did. This made it very clear to me and gave me even more incentive to stick to the budget, so that we can achieve our savings goals.

    I hope that breaking down the envelope system in a little greater detail helps some of you! It is very empowering to know you really are in total control & awareness to the penny !

    I’ll be updating about my new budget & use of the envelope system as well as my savings goals each month. No matter how much/little income you have or how much debt/bills you have, the most important decision you can make is to put it on paper and create a plan and set goals.

    Mint - Take Control of Your Money
  • Comments

    1. manila envelopes says

      Hi there, I enjoy reading alll of your post. I like to write
      a little comment to support you.

    2. Kathryne B. McFarland says

      Thanks for the posting.Just a note about any high water bills: my municipality’s water department suggested that we check for a possible leak when our bill ran higher than usual.It’s something you or a friend could do.Start in the bathrooms by checking for leaky faucets or a toilet that “runs” or takes a long time to refill its tank.A leaky toilet “flapper” valve can cause a significant water difference. We had to call a plumber to check our irrigation system.Once we let the water department know the leak was fixed, they adjusted the water bill.Some departments require you to show a bill to justify a leak, but most are willing to allow one adjustment per year per customer.hope you were able to re-coop that difference.

    3. So you take the money out of your checking account and put it in the envelopes and when you have the money in each envelope you pay the bills? so you put the money Back INTO he bank account to pay bills? I’m really trying to understand this system because it seems our debit card is the evil of all budgets I create. Thanks for the input.

    Speak Your Mind