Today is our final step to setting up a household budget: Cash Spending. Our goal for this step is to create a budget for our necessary weekly spending. Over the last 4 days, we have completed the following…
Day #1 – Assemble your Binder
Day #3 – Income & Debt Tracking
Day #4 – Annual & Monthly Expenses
Zero Based Budget:
The budget that I have shared with you during this series is called a “Zero Based Budget”. What this means is that you are assigning every dollar of your income to a specific category (whether it’s bills, groceries, or something in between). As Dave Ramsey puts it, you’ll be “spending your month’s income on paper” before you spend it in real life. This type of budgeting works well to pay off debt. It forces you to take control of your money. You are not letting your money take control of you. Ask anyone who has completed Dave Ramsey’s Financial Peace University and screamed “We’re Debt Free” how well it works. They will tell you it works really well!!
How much should you budget for Cash Spending?
Once you have calculated your monthly expenses (bills) you need to figure out how much money you have left & divide it into 5 categories. (To figure out how much money you have left, minus your monthly expenses from your monthly income). If you do not have enough money left to allocate to cash spending, you need to re-evaluate your monthly expenses. You may need to shut off the cell phones, cable, or sacrifice un-necessary things to get some bills paid off. You could also trade your car in for a less expensive model, etc. Of course, food & gas comes before paying your creditors, but you must be conscious of your spending habits. Ask yourself, “Am I living beyond my means?” If so, you need to either get another job or cut expenses.
Cash spending will vary from family to family, depending on your financial situation. If you are tight on money, you may need to cut down on your grocery bill, cook more meals from scratch, buy store brands, and clip coupons. Your cash spending will also depend on how many members are in your family. A family of 5 will require much more money in their food category than a family of 2. You have to evaluate your financial situation and determine what amount to set for each of these categories.
If you’re really determined to pay off all of your debt, the envelope system may be a good choice for you. With this system, instead of using your debit card, use cash for the categories listed below. The envelope system is rumored to have been started during the Great Depression, when everyone had to watch what they spent very carefully. Having that same mindset today may not be such a bad thing. The key idea to using the envelope system is visualizing the money that you have to spend & separating it into different envelopes, then once it’s gone, there is no more to spend in that category until payday rolls around again (even if you have more money in the bank). It takes determination to stick to this type of budgeting, as it’s very easy to “borrow” from another envelope or take more cash out of the bank. If you truly stick to the envelope system, you will get out of debt a lot sooner (because the money that you are no longer “blowing” can be used to pay down debt).
Calculating your Cash Spending:
If you have ABFOL Household Budgeting Printables, the form you need to fill out today is the “Monthly Budget (Envelope System)”. If you don’t have the printables, on a sheet of paper, write down the 5 categories (listed below) in one column. Then beside that column, create 4 more columns. Write down “weeks 1-4” at the top of each of these columns. Calculate your spending for each category. If you are going to use the envelope system, write each category on a different envelope & place your cash inside.
Cash Spending Categories:
3. Entertainment (Fun Money, Include dining out)
4. Personal Care (Hair, Nails, Clothes)
5. Household (Cleaners, TP, etc)
*What’s left over needs to go into a savings account or used to pay down debt.
Use the “Weekly Budget” form to keep track of your cash spending. Write in the allocated amount at the top right of each category and every time you spend in that category, minus it from the balance. You can keep this sheet in your purse or with your cash envelopes.
Note: You do not have to follow a “cash” spending plan. You can use your debit card instead, although it will most likely take longer to pay down debt that way.
Once you sit down and write out a budget, managing your finances won’t be so bad. You will feel more in control of your money & you will be less stressed. Budgeting is an ongoing process. You need to re-evaluate your budget EVERY MONTH. You cannot write out a budget and use the same one from month to month. It is guaranteed to change. You must be vigilant. Don’t give up. Set your mind to sticking to a budget. Pay off your debt and become free from the chains of your debtors. Its a beautiful place to be in. Thanks for joining me this week. I hope you learned something from my series.
Don’t forget to come back tomorrow to enter my “Budgeting” giveaway!! I have some fabulous prizes to shower you with.
BUDGET BINDER PRINTABLES
If you want to save yourself a lot of time, you can purchase A Bowl Full of Lemons“Household Budgeting System”. It’s includes everything you need to create a successful budget. This system goes hand in hand with my budgeting series. Visit (here) & take a closer look at the system. If you do not want to purchase, you can still follow along with the series and write out everything for your budget, on paper. It works just as well.
Tags: budgeting, envelope system, finances, household budgeting
Blog, Budget, Budget Binder Series, budgeting, envelope system, finances, Household Budgeting Series, May 2013, Organize, organize your finances, Planners & Binders Posted in 41 comments