Tuesday, October 07, 2008

Works for Me Wednesday: Simple Budgeting

Papa Rooster and I have never been very good at budgeting. We want to be, sometimes we even try to be...but neither the envelope system, the category system nor computer budgeting programs have ever worked for us.

But this summer, we moved from IL to WI. In the crunch of the move, we put all our associated expenses on a credit card and promised ourselves we'd sort it out later. Inevitably, sorting time came--and with it, get-serious-about-a-budget time.

Fortunately, we had the cash--from the sale of our home--to pay off our debt. But now we're serious about living on less for awhile, in order to pay ourselves back.

So for what it might be worth to someone else, here's what's working for us:

First, we looked at our net income for the month and subtracted all fixed expenses--tithe, mortgage, utilities, insurance, etc. We have nearly all those bills set up to be paid automatically. Next we decided how much my husband would need for spending money per week, for personal expenditures and a few lunches with co-workers. He takes out that amount in cash every Monday, or transfers it to a separate checking account he used to use for work, so that he can put online purchases on that debit card and not on the household account. The only thing he uses the household credit card for is gas.

(We like to put purchases on a credit card that gives us points toward miles or gift cards--we just want to control how much we put on it, and make sure we are paying it off in full each month.)

Then we subtracted what he usually spends per month on gas. Looking at our new remainder, we picked an amount that we'd like to pay ourselves back per month and subtracted it. What was left over is my magic number: the number I'm trying to stay under with the rest of the household expenses--food, gas, piano lessons, theater classes, printer ink, clothes, shoes, library fines, shampoo, ER visits, vitamins, books, napkins, laundry soap, puppets and other incidentals.

Then I started a page in my little planner, the one I keep in my purse, and every time I paid for something, I wrote it down--right away if it was something I didn't get a receipt for, or I saved receipts in my wallet and wrote them all down every couple of days. I learned how to use the calculator on my cell phone, and any time I was standing in line somewhere, I could subtract and keep a running tally of how much money I had left. (Assuming my phone had enough battery--always an iffy bet.)

The beauty of this system is that it's simple and flexible. I don't have spending limits in lots of different categories, I just have one big number to stay under. So if I have a lot of extra expenses like school clothes and registration fees, then I try to buy nothing but necessities and super-sales at the grocery. I'll remember to bring along a box of granola bars and a bag of apples the next time we're out and about at lunchtime, instead of planning to stop at Wendy's. I cut short the impulse to buy unnecessary things, and I hear myself saying, "Maybe next month" to my kids and to myself, instead of buying it now. I'm thinking more carefully about how I can spread out expenses, instead of paying for many extra items in one month.

Another reason this system is working, I think, is that it goes with me everywhere, unlike our unwieldy previous attempts which required the computer or envelopes full of cash. And best of all, I don't have to coordinate it with my husband. I'm all for marital communication and teamwork, but I think it was what killed all our other attempts at budgeting. I mean, who wants to spend marital energy on this stuff?

With this system, he only has to manage his money, and I manage the rest. The only time we have to communicate about money is when he makes a grocery or drugstore run for the household; then he has to hand off the receipt to me. We do have to connect once or twice a month just to check our balances, make sure the credit card gets paid off, transfer the money to pay ourselves and check my running list of purchases against the actual statements. (Or not...when things get busy....)

So can I stay under my magic number? It's an aggressive one, and I'm doing my best...but when I don't hit it, I can either try to spend less the next month, or we just pay ourselves back a little less than we planned. (Y'all understand that this number could be the amount you're putting toward paying off debt, too.) The good news is, even if I don't quite make the target, we're still saving more and spending much less than we were! Keeping track has been nearly painless. And I love being able to quickly figure out an answer to the perennial question: Can we afford it? Now I can tell! (And usually the answer is: Not right now, but we can on the first of the month!)

Now, do you think the federal government can come up with a budget that works for them?

For more marvelous suggestions that work for somebody else--and might for you too!--visit Rocks in My Dryer.


Sherry said...

Great information! THank you for sharing how it is working!

Have a great WFMW!

Amy said...

I use the "there's checks in my checkbook, that means there's money in my account" method . . . not working too well . . . maybe I'll try your suggestions! ;o)


A&EMom said...

Awesome idea! None of the budgeting plans you mentioned worked for us either - maybe this is it!

Thanks for sharing!

TwoSquareMeals said...

We are in need of a new budgeting system, and this is perfect! Thanks for sharing.

MomCO3 said...

This system just might work for us... nothing else has! Thanks for the details.