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Budgeting 101 – Part 2

I started off this series by encouraging you to set aside your excuses for why a budget won’t work and asking you to join me in this budgeting adventure. I’m excited that so many of you are listening in and considering how a budget might help you with your finances.

Determining
to step out of your comfort zone to try this budgeting thing is the
next step toward financial success. When there’s a will, there’s
usually a way. And we’ve certainly found this to be true in our own
lives.

Before we got married, my dad challenged my husband and I
to set down and make out a workable budget on paper. Talk about a great
exercise to really get to know one another during our engagement!

I
would highly recommend all engaged couples consider embarking on the
exercise of budget-making. It may be eye-opening to both of you!
Actually, whether you are engaged, newly-married, or celebrating your
thirty-five-year anniversary, I’d recommend you consider this
exercise–especially if you are struggling financially.

Where do you start?
Jesse
and I began by talking through every expenditure which we felt was a
necessity. Many people recommend writing down your income first and
then divvying it up into percentage brackets for the various
necessities and extras your budget might contain. If you are really
detail-oriented and a numbers person, this might work for you. But for
most of us, this would be overwhelming and we’d chuck the whole
budgeting thing before we even began.

Sit
down with your spouse (if you’re married) and start by listing your
basic living necessities: Tithe*, Shelter, Food, Clothing, Utilities,
Transportation.

There are other items which are likely
almost-necessities, but we’ll get to those later. I want you to focus
on keeping it simple! So we’ll start with the big items:

*Tithe:
If you are a Christian, I heartily encourage you to set aside 10% of
your gross income first thing to give to your local church. By
cheerfully giving of our firstfruits to God (even if we don’t feel like
we have extra for this!), we are demonstrating that God is the first
priority in life. God will bless you for your obedience to His commands
and your willingness to honor Him first
with your finances and to selflessly give to Him. And God can make the
90% of your income go farther than you ever thought possible–I’ve seen
this so clearly in our lives and in many other lives.

How much are you spending on rent or your mortgage per month?
Write it down under the "Shelter" heading.

How much are you spending on groceries and eating out per month? Write it down under the "Food" heading.

How much are you spending on clothing per month? Write it down under the "Clothing" heading.

How much are you spending on utilities (electricity, water, gas bill, etc.) per month? Write it down under the "Utilities" heading.

How much are you spending on transportation (gas, car payments, car repair, etc.) per month? Write it down under the "Transportation" heading.

Now,
for some of you, you keep meticulous records and know exactly how much
you spend in all of those areas. For most, you probably have a very
basic idea but don’t know specifically. You might know how much your
rent or house payment is, or how much your car payment is, but that’s
about it. What do you do then?

Well, start by giving a basic estimate of what you think would cover all of your expenses in that category for a month. This
will likely not be totally accurate, but it’s just your starting point.
I’d recommend that you estimate high when you first start out–you’d
much rather get to lower the spending in that category, than to have to
raise it.

If you are paid weekly, divide the monthly amounts by
four and set aside that much each time you get paid. If you are paid
bi-weekly, divide it in half and set that aside with each paycheck.

If
your income is variable, we’ll talk more about how to budget on a
variable income in the near future, but for now, I recommend you take
into account how often and how much you are usually paid and then divvy
up the paycheck accordingly.

If you have no income, well, we’ll talk about that later, too. 🙂

When you get your paycheck, automatically deduct from it the above amount that you have alloted for each category. The main reason for doing this is to encourage you to begin developing the discipline of covering your most important expenses first. This will save you much financial headache and turmoil.

I
recommend you go ahead and pay the rent or mortgage payment (at least
write the check), pay the car payment (though I hope to convince you
soon that you shouldn’t ever take out a car payment again–ever! But that’s for another post!), and pay the utility bills as soon as possible.

I recommend you take out cash for clothing and food and stick those in two different envelopes to only
be used for food and clothing, respectively. If you’ve never used cash
like this before, we’ll talk more about the envelope system and why I
recommend it later. I just encourage you to try it for now. If you’re
like us, you’ll find that taking real cash with you to the store
instead of a credit card or even a debit card means you find it much
harder to part with and so you’re instinctively more careful about your
purchases.

For your gas, I’ll let you decide what is best. We
use our debit card for this and set aside a certain amount every two
weeks. This allows us to pay at the pump and saves us some time and
effort. It’s especially nice when I need to stop for gas while I’m out
by myself with the two girls. This is one of the few things we use our
debit card for. If you prefer cash or check, use that. I don’t
recommend using a credit card for anything,
but I’ll leave that option up to you if you’re still not convinced
about shredding those up yet. Again, we’ll talk more about that in the
future.

At the end of the month, stop and evaluate how this system worked for you. Do
you need to increase any of the categories because your estimations
were off? If so, re-work your budgeted amounts. There is absolutely
nothing wrong with doing this. In fact, it is to be expected. Your
budget is not a strict slavemaster, it is a guideline and tool that
grows and changes with you as you move throughout life. It will change
with the ebbs and flows of life and when you are first starting out, it
will need lots of tweaking.

If you have money leftover in any of
the categories, roll it over to the next month. I recommend you wait at
least a few months before lowering any category as you’d rather have
some extra than not enough.

Once you feel confident in the above
exercise of budgeting your basic necessities, you are now ready to move
on in the direction of budgeting more or all of your income. We’ll
discuss that more in-depth in the next installment of this series. Stay
tuned!

If you have a budget, I’d love to hear how you got started with budgeting and the blessings which have resulted from budgeting.

Originally published February 2008.

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41 Comments

  • Tracey Kelly says:

    I just wanted to drop by and say that I visit your site everyday and just love it! You are doing some wonderful work here that has so much more to with them just being frugal! Thank you once again!

    Tracey Kelly

  • Nancy says:

    Hi Crystal,

    I have been a daily reader for many, many months. I am wondering if/when you are going to start up the monthly posts about the financial check-up status? You know, where we all stand on our baby steps. 🙂 Thanks!

  • Patricia says:

    Every quarter I pull all of the information for our cable bills, cell phones, internet access, car insurance, credit cards, exterminators, home mortgage, home insurance, ect. and ask for quotes from their competitors. Many times your current company will match the quotes.

    This year we will save $800 with our home insurance by my one phone call. Apparently, with a new home inspection our rates were reduced.

  • Elizabeth M. says:

    My husband and I have had a budget for the entire 3 years of our marriage. As our lives have changed — one baby with another on the way, changing jobs, buying a house — we’ve gone over the budget and modified it. Having a budget enabled us to pay off our entire school debt before we had our first child and to live the great blessing of being debt free until we recently took on a mortgage.

    We are far from perfect at budgeting and sticking to the budget, but it is a worthwhile challenge!

  • Ivy says:

    I know that a lot of people, especially on finance budgeting blogs will say that credit cards are evil and not to use them because you will ultimately wind up with debt.

    I happen to disagree.

    If you are very careful with them, they can be a big money-saver/maker.

    For instance, I have a capital one rewards credit card. I only use it for gas, groceries and drugstores – I get 5 points per $1 at the 3 above types of shops. I never use it for anything else and already have a working grocery/drugstore budget per week. I automatically have $100 go to pay-off the credit card every week and so I pay no interest.

    Because I get these points, I have made $121 through capital one in the past 6 months by redeeming my points for giftcards. Since I just moved, we were able to buy furniture and other household items with this money instead of paying out of pocket. In the next 2 weeks, I’ll be able to redeem for another $50 giftcard, bringing my earnings up to $171.

    If you budget with them and use them smartly, I don’t think everyone should completely rule them out.

    *****************
    Money Saving Mom here: Like I said in my other comment, I am guessing you could have had a whole lot more money to work with (in most cases) if you shredded the cards and used cash.

    There are rare cases where people can actually use cards to their advantage. But these are *very rare*.

    I’ve found that grocery shopping with only cash, as opposed to grocery shopping with a card, forces me to stick to a very tight budget. And it saves us a lot of money. When the money in the envelope is gone, it’s gone. A card doesn’t work like that and it’s so much easier to spend an extra dollar or two or three here and there without even realizing it.

    And those extra dollars can truly add up. To the tune of much more than $121 over six months. 🙂

    Try a cash-only budget for a little while and just see what happens. You just might fall out of your chair at how much more money you have at the end of the month.

    Maybe not, but I think most people would be pleasantly surprised. 🙂

  • We started with a budget after reading Total Money Makeover. I really like using the budget, because while we always had enough before, now I really know what is going on. Instead of keeping more in reserve, just in case, I can confidently attack our student loans with what is left after budgeting expenses. It has made us think more about our spending too.

    I wanted to mention that it’s NOT just a tool to get you to spend less. In some cases, it can help you spend more where you should. For example, after years of having very little, I found it hard to spend anything on myself, I was so accustomed to trying to save everything I could. Giving myself an amount for “fun money” each month is very liberating. Sometimes there isn’t anything I want to spend it on, but when there is, I can do it without stress. That makes it easier to save with the rest.

    We’ll never go back to not budgeting. 🙂

  • Katie says:

    Thank you for all you do, I have learned so much from reading your blogs. My husband and I have been using a budget since we married 4 years ago. Now, two children later and paying a mortgage in Virginia and renting in Texas, we are money argument free. I know this is a common area of stress in a marriage and by trusting in God and seeking his will when you create your budget you can stress-proof your marriage.

    One question, do you use a software/system to track your expenditures? I currently have a notebook that I “virtually” divide up our money each month into envelopes and everything we spend comes out of the envelope. I have it divided up in many different catagories so it takes some time to write everything down and keep it straight. I feel like there is a more efficient way to do it, but not sure what the best way would be. Would love advice from you or anyone reading.

    Thanks,
    Katie

  • Gretchen says:

    We’ve tried different ways to budget over the years, but last year read Dave Ramsey’s Total Money Makeover and it just made so much sense!! We started over with a new budget and the thing that made the biggest impression was the FREEDOM it gave me…knowing every bill had a place, and every dollar had a name! Now, I have to admit, there are months where we slack off a little bit, but it doesn’t take long for me to wake up and remember how much happier/healthier we are when we stick to a budget!!

  • Michelle says:

    You have inspired me to budget! This should be interesting. I am using a gift card system for groceries which helps out my friend who is sending her child to a private school. Each month I buy my budgeted amount for groceries in gift cards and she gets a percentage of it for her child’s tuition. Once I work this out I will plan ahead for gift cards in clothes and other categories!

  • Sheila says:

    A budget can be the most frustrating thing at times and the most freeing. We have had our budget now for about 6 years and most of the time I love it! My husband and I took the Crown Financial class at our church which was great. One thing they suggest is to keep track for 1 month of everything you spend, down to the .50 you spent on a can of pop. That way you can look at how much you are spending on clothes and eating out and groceries all of the other things to help you better figure out what to budget for those catagories.

    The reason I feel it is so freeing is that I feel like “I” am no longer the one to say NO we can’t afford this, we simiply look at our budget for that item and see if we can afford it or not. I love seeing that we are actually saving money every month. The times that having a budget gets to be a little frustrating is when things don’t balance, when you purchase something but there is no catagory for it, so where do you take money from to make up for it, but I have to say the good far out ways the few frustrating things with a budget!

  • Budgeting has been a true financial life-saver for my husband and I!! We used to budget several years ago, then got out of the habit… ended up using a LOT out of our savings account, and finally were smart enough to realize that budgeting was the only way!

    I’ve actually done a short series on easy home budgeting on my website, available here:
    http://2livinglightly.blogspot.com/2008/07/home-budgeting-101-part-one.html

    Thanks for sharing your method Crystal!

  • Davonne says:

    Thanks for this series! My husband owns a computer business and I have recently began working at a Christian counseling center in order to pay off our debt quickly. We will, Lord willing, be out of debt around September of next year, except our house. We know that in order to put 100% of my income towards debt, we need to be disciplined and have a budget, which we are going to start keeping on September 01 this year. So I guess that means that as of this coming Monday everything we spend will be accounted for! I am very excited to get out of debt, and I appreciate you posting about this at the perfect time for us. My boss recently said that God pays attention to every detail, and I know He’s paying attention to this!

  • Mandy says:

    I have just recently been introduced to your site and I must say I’m addicted. Slowly, but surely I am saving dollars and cents. I have always tried to budget, but not really used coupons and planned my shopping trip s as much as needed. However, I have had the envelope system into place for several years. One thing I have found to work for me is …if I have any money left over, I put it in an “unexpected” envelope. This has really helped with the “unexpected” bills (car repairs, ac repair, lawn mower repairs). And it also allowed us to take an unexpected vacation after 2 years. Thanks you for all your insight and knowledge.

  • We did our budget 3 years ago and have stayed on since then. We have saved a lot of money to pay off debt this way. Before the budget we did a lot of hoping, wishing, praying, and overdrafting to keep us afloat. Now we know where each dollar goes. It is great too, to be able to see funds grow big for things you would have never considered. Saving for Christmas in January? Saving for a small road trip? These are things we wouldn’t have been able disciplined to do before.

    The key to our success is the envelope system. We have to be diligent to get the money out of the bank every week, but that has become habit after three years.

  • Sherri says:

    Crystal,
    You don’t need to post this, since not everyone would benefit from the advice. I disagree with your response to Ivy that not using credit cards will save you hundreds/thousands per year. We have a budget and we stick to it, no matter what form of payment we use. (Not everyone will be that disciplined, and some will be tempted to overspend, so that’s why you may not wish to post this online.) Here’s the deal, though- we have a credit card that gives us a 5% rebate when we buy gas at Hess, which also happens to be one of the cheapest stations in town. For the 1st 3 months it was 10% back on gas- nice! This card also gives us 1% back on all other purchases. We always pay the full balance every month (since the money has been allocated in each catergory), so there are never any finance charges. I write one check and use one stamp, and we get back an average of $20 a month. When we replaced our refrigerator recently, we earned $8.50 on a purchase we could have paid cash for. Plus, I get the benefit of leverage- using other people’s money for free while my own sits in the bank and earns interest until the end of the month. Car repairs, groceries, gas- all of these go on the credit card. I do have an envelope of cash that is designated groceries, so I can take out what I’ve spent and make sure I don’t go over. But the credit card has been a blessing to use, not a bane. We use it for convenience, for the rebates, and for the leverage it gives us. It has saved us hundreds, not cost us. I recognize that this system only works for people who can control their spending- if you carry a balance because you spend too much, then getting 1% back isn’t going to do you any good. And it builds our credit score, which qualified us for the best mortgage rates. I hope this is helpful for you to see another perspective on this issue.

    **********************
    Money Saving Mom here: Sherri, yes, it can work for a very, very few people. But if it worked for most people, we wouldn’t have a huge economic crisis, would we?

    It starts with the little things–buying on credit when you could pay cash quickly can turn into buying lots of things way outside of your financial means and getting yourself into a huge financial mess.

    You might as well avoid going down that slippery slope. And one of the main reasons I personally don’t think it’s wise to buy anything on credit–even if you have the money to pay for it–because you just never know what the future holds. I’ve seen so many people get into financial mess because they were presuming upon the future and life threw them some curveballs.

    I like to encourage everyone to just try a budget and cash only for six months and see what happens. If anything, it might force you to realize how undisciplined you are. Or it might cause you to realize how swiping a card is causing you to spend way more than you need to be.

  • Morgan says:

    I can tell many of us are Dave Ramsey followers, me included! I have to give you some credit Crystal, you were the one who introduced me to Dave Ramsey’s books and website and I have been wholeheartedly following his suggestions.

    -Morgan
    mvalencia@astoneagency.com

  • Chris from St. Mary's says:

    I just started budgeting a couple of months ago and am still getting the hang of it. I use mint.com to help me see where I’m at on the monthly budget and I have saved some money already. Since I know I don’t need it, it’s allowed me to start a car snowball savings account with ING with any extra for any traveling I might need to do due to my Mother’s illness and/or eventually a better car.

    I am also “paying myself” already and finding extra cash to throw at the emergency fund. It’s also allowed me to be smarter about where I keep my money. I kicked out Chase for my checking/savings account because they didn’t charge enough interest on my savings yet required that I keep $300 in there to keep from getting “fleas.” I went with a credit union that has comparable ATM withdrawal coverage and put my savings into ING with a checking account. So it’s also earned me money.

  • Esther Flora says:

    Thanks for saving me so much money through your site! I entertain a lot, so I would LOVE to have Nancy Twigg’s book!
    -Esther

  • Esther Flora says:

    Thanks for saving me so much money through your site! I entertain a lot, so I would LOVE to have Nancy Twigg’s book!
    -Esther

  • Esther Flora says:

    Thanks for saving me so much money through your site! I entertain a lot, so I would LOVE to have Nancy Twigg’s book!
    -Esther

  • Megan says:

    We met with a friend who is a financial planner / accountant a few months before we got married. She helped us come up with a budget and helped us think about things that we would have missed on our own (ie. we put $30 aside each month to cover our license and registration fees, if we hadn’t done that, the $100 bill last month would have been a hard hit). We also decided to use the envelope system. We have “envelopes” for certain things (some are actual envelopes, and others are money that has been set as (as in taken out of the check register) in our bank account, this way there isn’t too much money floating around the house). This has worked very well for us, we are on our 6th month of marriage. It’s good to know that we can only use a certain amount for eating out or clothes each month, and to only have cash. So once the cash is gone, so is the option of buying things from that budget category! Oh and we put cash in the envelopes monthly, not weekly!

  • Sherri says:

    We must be some of those “rare” people you mentioned. I DON’T buy extra things just because I’m using a credit card. I used a cash system for several years before we switched over, and I have not noticed any difference in my spending (with 3 kids now, I’m probably tighter now than I was before). My credit card also gives me some freedom- if on Friday I find boneless skinless chicken on markdown at 99 cents a pound (and I have), then I can still buy 12 pounds of it without being “out” of cash. I budget monthly instead of weekly- that gives me the flexibility to get a good deal whenever it happens to come up.

    So, I’m with IVY- my credit card saves me money. We get about $20 back each month by buying the things I would have bought anyway.

  • Joye says:

    Your site is such a blessing. I continue to come here everyday for new and useful information! We have tried to follow Dave Ramsey’s teachings and for a few months is was working but I got lazy…I have to get serious again and you are helping me move forward! My hubby and I are both spenders by nature (we were raised to spend…bad!) but we are both realizing that we are too young to have this much of a financial woe…so we are working to get everything back to debt free. I look forward to your next post, and plan to go home tonight and show this to my husband – we can make the list together!

  • Jamie says:

    I was introduced to Dave Ramsey through the radio program and eagerly bought his book before I was married. We struggled with the envelope system in the beginning when our standard of living increased from small town living to big city living and we did not have a consistent flow of income. Last month we decided to take the challenge again after the majority of our debt has been paid off and we saved $650.00 in August!

  • Marli says:

    Pastor of Gateway Church in Southlake TX and author of The Blessed Life speaks about tithing and giving. He discusses why it is so important and how it can bless your life http://www.theressomuchmore.com I highly encourage you to visit and watch these messages. It is lifechanging.

  • Kasey says:

    I remember reading a story during our first year of marriage about a man who was in his forties with a wife and 3 kids, and was desperate because they were barely making ends meet. It hit home with me, because my family had been that way growing up, and I was currently in that state with my husband.

    At that moment, it hit me like a lightning bolt- if I wanted my future to be different, I had to be the one to change it. Just sitting around waiting for a better paycheck or to win the lottery wasn’t going to get me anywhere!

    That was when I started budgeting. We made a plan to pay off all our consumer debt, and buy a house. Now we have been married for 6 years, and we are completely debt-free with the exception of our home, which is big enough that we should be able to stay here until our kids are grown. We are on a bi-weekly payment plan with our mortgage, and we are paying 30% extra on it every time, so we are on track to have it paid off in 11 years.

    We are also quickly building our emergency fund, and we should have that in place within a year, and we have both a 401k and some stock investments with my husband’s company that are growing steadily.

    All in all, it feels so good to have financial security, and to know that at 26 I am better off financially than my parents were at 45. Money trouble is one of the big reasons their marriage failed, and it is reassuring to me that my husband and I have an open money relationship- we talk about it and we get excited about our financial future.

    You know the saying that “Nothing tastes as good as being thin feels”? Well, I believe that nothing of monetary value is worth as much as the feeling of being financially secure. My husband’s income is only marginally higher than it was when we met, but we are now putting that money to work for us through our budgeting, and it feels GREAT!

    All I can say about a budget is DO IT! That which doesn’t change stays the same. If you are not happy with your financial situation now, the only way it will change is if you do something about it.

  • Jessica says:

    I am also a ‘rare’ one I guess, in that my husband and I earn money from our credit cards. We have never paid any interest or late fees. We only charge what we would normally buy. I live in a large city and simply do not feel comfortable carrying more than $20 in cash. Plus, my work place requires direct deposit, and my work hours don’t coincide with bank hours, and oddly enough, there is no atm near work! I use my Meijer card, and the rewards are “meijer bucks”, which equals free groceries. Our only debt is our mortgage, which we are paying off extra on the principal each month. If we continue on our current track, we’ll have it paid off after 7 years rather than 30! That assumes we both continue working full time and paying off at the same rate. However, we’d like to have another child in the next year so we may not be able to continue paying off so much on the principal. But as long as we can, we will. It also helped that we bought much “less” house than we could afford. Our house is not in the best neighborhood, and doesn’t have the best ammenities, but it is good enough for now.

  • Jennifer says:

    I’ve been reading your blog since we moved to the States and I find it very informative, helpful and interesting. My husband and I have been incredibly strict budgeters since we got married – we were forced to in some ways as I moved to Australia to be with him, couldn’t work (because of a visas) and we had to live on one income. I was lucky and didn’t grow up having to budget every cent, but he did, and I quickly changed my ways, and thinking. We look at our budget as a “working document” and it is reviewed at least each week, if not more frequently (I’d actually recommend new budgeters look at their’s every day in the beginning). I’d like to suggest a few additional things to think about when setting a budget:
    1. Don’t put a category called “miscellaneous” which we did for the first few years. We’d put about $50/month aside (we were paid monthly) for Misc and found by the end of the month we had spent $100 in Misc. We realised that EVERYTHING should have a “real” name – and soon we weren’t spending that $100 anywhere!
    2. Inevitably you’ll want to buy presents throughout the year (birthday, new babies) and Christmas. Every January we sit down with our calendar and map out the birthdays we need to buy for, Christmas, etc and come up with a budget for each individual, the occasion and then the total amount. We divide it by 12 (the number of pays we have) and set it aside in our bank account each month. Then when I’m out and about if I find something on super sale that I know is perfect for someone – I have the money there to buy it. This way I’m not running out at the last minute and spending four times the amount for something not on sale the day before their birthday because I forgot!
    3. Our latest thing is couponing. As we don’t have coupons in Australia, I’m getting into it here in the States. I only use coupons on items that I would buy normally – so the savings is a bonus. I think add up the total saved each shopping trip and set it aside in our bank account. As I would have bought the item anyway, the coupon, for us, is viewed as “extra” savings. I know this is not the case for everyone. At the end of a 6-month period we are going to take that “extra” savings and use it for investments.

    I would like to encourage anyone sitting on the fence about this budgeting thing to definitely try it. We have a couple who are our good friends who are heavily in debt (due to credit card spending and just bad financial decisions) – yet they continue to put off making and sticking to a budget. They keep saying “we’ll do a budget when our debt is paid off”. This is such, in my opinion, a backward way of looking at it – they need a budget NOW more than ever! Work your current debt payments into your budget and it will disappear before your eyes.

    Good luck!

  • Sarah says:

    One thing I think we forget when the word ‘budget’ is present is how freeing a budget can be. Granted I’m a tightwad when it comes to many things; I’m pretty good at keeping costs down and telling myself I can’t have stuff. What I’m not good at is allowing myself things that make me happy (travel, family fun, giving generously, etc.) or things that I genuinely need, unless I’ve budgeted for it.

    I live in Alaska and our shopping options are pretty limited. When I visited family last year, I took along a list of all the clothing my husband and I needed for the coming year. I went on a two day ‘shopping spree’ spending our budgeted clothing allowance. It was fun because I was getting things I needed/wanted and very satisfying because I was able to get everything on my list within our budget!

    And last year when my mother-in-law announced she was coming to visit, I added a travel category to our budget. We had a wonderful time with Mom, because I had planned the activities we wanted to do and budgeted for them.

    My budget *allows* me to spend money while living below our income.

  • Kimmyannangel says:

    I used the “envelope” type of budgeting for a few years (while my husband went back to school), but found that it took too much effort and I stopped doing it. Needless to say, our budget suffered. I have found an easy alternative that I’ve been using for three years now. We have two checking accounts, one called Payments and one called Allowance. Every time my husband gets paid (every two weeks) we have $400 automatically transferred to the Allowance account. The Allowance account is used for all expenses except the mortgage and utilities (we have no car payments or credit card debt), for example, groceries, gas, clothing, medical, etc. I use a debit card to pay for everything out of the Allowance account, but when it’s gone, it’s gone. We also have an emergency fund and a gift/Christmas fund. That way I’m not making lots of trips to the bank to get cash and trying to keep things sorted into envelopes (how do you differentiate between groceries and clothing when you shop at Super Target?). It works great and is easy, easy, easy! Also, I would like to add my support for paying a tithe to God. The blessings will follow!

  • I do like Sherri does. I wouldn’t recommend the credit card route for most people, but it works as long as you are really disciplined about it. I’ve gotten hundreds(actually, into the thousands) of dollars of rewards over the years by operating this way.

  • Lyn says:

    I totally support your advice, Crystal. It has taken almost 5 years for us to get out of consumer debt. It was a hard road. It’s easy to think “oh, I’ll just charge this small amount” and then things add up – unexpected medical bills, car repair, etc. Add in a job loss or two (which is what happened to us) or an ill or injured spouse and now you have a balance that you cannot pay in full.

    Unless you have a significant amount of savings to fully pay off a balance if such a life challenge should arise, I would not even suggest to use credit cards. Does anyone really think the credit card companies are trying to do you a favor? No, they want you to continue to charge for every little thing that you can, with the hope that at some point you won’t be able to pay the minimum, and then they can trap you. They are out to make money, they are not out to make life better for you. They psych you out by allowing you to think that you are really getting a deal, when in reality people may be shopping more than they need to in order to get that percentage back.

    I also totally agree that by living frugally, I can save so much more per month than I could by charging expenses on a pay-back percentage card. Even better? Shop for true needs, stay away from catalogs, online shopping and going to the mall. That alone saves a ton of money for us!

  • Mel says:

    I just recently found this amazing site. I absolutely love it! Thank you for all your hard work!!
    My husband and I have been married for 3 years and we have had a budget the whole time, which has given us so much financial freedom (we both had one when we were single too). We also firmly believe in giving to the Lord first, even when things are tight!
    I do have a question though. This past year we have been hit with many financial trials. I was recently diagnosed with a chronic disease and the medical bills for just the diagnosis were over three thousand dollars. At the same time my husbands car starting having troubles which cost over two thousand dollars to get it fixed. We did not have enough in our emergency fund to cover all of these expenses and we felt like we had no other option but to put the bills on a credit card and then to start chipping away them 🙁
    My husband and I hate credit cards too, but at the same time what do you do when you have major unplanned expenses that are just way over your budget?? Any thoughts??

  • Lisa says:

    I am a newbie to your site and love it. As a loan officer by day and a volunteer finacial planner at my church I wanted to applaud your post. Great points that you have given.

    I really appreciate you mentioning a tithe. Though not required as a Christian, we are asked to give our first fruits to the Lord. The Bible also mentions that God asks us to test Him with our money. He will provide if you are putting Him first on the budget.

    Thank you again for all your money saving tips. I am quitting my day job to become a SAHM and I know that your ideas will help make the transition a lot smoother.

    God Bless you!

  • Susannah says:

    I think I budget by actually paying the bills on the day we get paid. Because I use online billpay (free through the bank), I can sit down, type in all the amounts for everything on my list, click “done,” and the bank does all the rest for me.

    I don’t have a “clothing” budget. Anything extra goes for food and gas. I am striving to do the cash thing you mentioned: withdrawing a certain amount for food etc., and living on that.

  • I’ve also done the cash envelope system and at times it works well. You are less likely to pull out cash to buy something unnecessary and it’s so easy to reach for the debit card. I have to say though I think that with three kids and a busy lifestyle, it’s harder to keep track of where our expenses go with the cash only idea. I always have the best intentions, each month, to keep track and save receipts but most often don’t have the time or discipline to do so. We do budget and write out what we allow for each category, we just keep track weekly in a register or by checking online info. I’d like to know an easier way of tracking. Anyone have a suggestion?

  • Stacy says:

    When we started budgeting, one of the first things we did was to take one month and write down every penny that we spent in a notebook, and what it was spent on. At the end of the month, we sat down with our notebook and divided everything into categories.
    Many people are really surprised the first time they do this.

  • Melodie says:

    My husband and I have been tracking our finances in a very detailed fashion for the past–well, nearly two years. Before that, during our first year we were careful with finances, but not so detailed with our budgeting and tracking. Now, we have been able to become much more aware so that we are able to save more and plan more for the bigger things that are really important.

    We are debt free at present minus a few interest free hundred dollars we are paying my father-in-law to finish off paying for our first vehicle. But with our family growing rapidly, we are going to need a new-to-us vehicle soon and will likely take out a small manageable loan for that. (I am looking forward to your discussion about that sort of thing later. At this point not going into debt seems out of the question for us, but I eagerly await your challenges to the contrary.)

    Crystal, the only thing that I would do differently than what you have suggested is (and don’t take this wrong) use a credit card. Reason? We get cash back for every dollar spent. We get 3% back on all grocery items, 5% back on all gas dollars spent, 1%-3% on all other items. We even get cash back on paying our taxes and utility bills with the card. We use our cards as if they were checking account cards ,and we pay careful attention to each purchase made, recording each one and evaluating them as we go. I realize this might be a struggle for some to keep track of and thus could be a temptation for debt; but for us, it is an investment that is worthwhile. We have gotten free hotels, car rentals, clothing and home improvement gift cards, grocery items, money off of our monthly bills, even restaurant certificates for our anniversary celebrations . . . all based on what we spent on our cards per quarter. There are even perks for purchasing online with some companies offering anywhere from 3%-20% cash back for ordering their products through that credit card’s website. We watch for sales at those places, put our orders in and have the stuff shipped to the stores so that we don’t have to pay shipping. It is a bit tedious, but the interest is better than a savings account, and it is based on our out-go versus our income.

  • BarbaraLee says:

    I am fine tuning our budget since dh has been working o/s the home.
    One thing I would like to ask is about tithing. Do you tithe before you pay your bills or before?

    *******************
    Money Saving Mom here: Yes, we personally have always tithed off the top–it’s the first thing that comes out of our budget since it’s the biggest priority to us. However, I’m not here to split hairs over how people should tithe, I’m just encouraging people to take the step of faith and do it! You’ll be blessed in giving, even from a very limited budget.

  • Patti says:

    I have been married for 32 years and we have used a written budget the whole time. It is fun for us to go back over the years and see where our priorities have been and how they have changed! The biggest thing about using a written budget and discipline is that you are in control of your money – it does not control you. Talk about freedom! We have been able to weather several crisis situations that could have bankrupted us if we had not had money set aside for emergencies. And I can’t emphasize enough that compound interest does add up – even if you just save a little bit each month. So many of our friends have let “life” interfere with their savings and now have nothing to show for a lifetime of work. We are so very glad we started that habit – I think it was $25.00/month the first year we married. Now we are facing my son’s college tuition and our future retirement with confidence and joy.

  • Jon says:

    I struggle budgeting when prices continue to go up. How do you account for utility bills that may go up 10% in a few months? I found this site http://www.utilitybillassistance.com which gave some ways and programs that help save on utility bills, both from the gov’t and utility companies themselves. It is OK site, but looking for my tips. Do you have any other ideas, sites or programs? My heating bill just keeps going up and up. Thanks

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