At the start of this winter, we decided we wanted to get serious about our spending. Thankfully, both my husband and I are fairly thrifty, and if we make any large purchases it is done with some serious consideration and planning. However, we know that all those little purchases quickly add up- a coffee here, a lunch out there- and we wanted to create some type of a system that helped us monitor where our money was going each month.
Prior to starting our plan, we consulted Dave Ramsey's website for some help. While not regular listeners of his radio show, we do catch it from time and time and always enjoy his advice on financial planning and saving. Dave Ramsey recommends that you document every penny coming and leaving your household each and every month, all the way down to zero (he calls it a zero-based budget). And it's not that you're spending it all, but rather that you know where it is all going- $X to the emergency fund, $Y to the vacation savings, etc. He also is a big fan of paying for things in cash. Let's face it- it's definitely harder to pay for things when you can feel the money physically leaving your hand!
Being the end of May, we sat down this afternoon to do our end of the month recap. What we have done thus far with the budget has truly been a work in progress. We started off in February using Dave Ramsey's cash envelope system, where you carry cash in different envelopes (a restaurant envelope, a grocery envelope, etc). However, we found that the cash system didn't really work for us because of the preparation involved. We didn't feel we needed to use cash as a restraint to overspending (but for some it's a good way to go).
So, we changed things up and decided to go ahead and spend as we usually do with our combination of debit card and cash. It's a lot easier for us to make sure to write down every expense. I found an ipod app called "Xpense Trkr" that allows you to input all of your purchases and break them down by date and category. There was a free version to try out which only allowed you 5 entries. We splurged and actually paid for the regular versions of the app (that has unlimited entries), and so far think it's a good system for us. We'll enter our purchase onto our ipods right afterwards, or I'll throw the receipt in my purse to enter in later. Similar to how a food diary keeps you from overeating, writing down each expense keeps you from overspending.

At the end of each month (and this gets a little dorky, I admit), I enter the month's "data" into an Excel spreadsheet that I put together. I enter in our paycheck amounts and the totals for each of our spending categories (ex: Housing, Utilities, Food, etc). This part has, I admit, been a bit more time consuming. It's also been
challenging because it's when we combine our data that we
realize the kinks we need to work out and the adjustments we need to make ( not only with our spending, but also logistically with how we're going about this).
In our spreadsheet, I subtract our expenses from our income, and try to get it as close to zero as possible. And by "money out," again, it doesn't mean that we've spent it all, but rather that it's been allocated toward something, such as savings. Ramsey recommends that you do this with your budget (prior to spending anything- and then you only spend the amount you've budgeted). We've augmented it so that we figure out what we've actually spent and compare that to our income. If we ever find that we're going over each month (which I hope never happens!) then we'll go back to actively budgeting out our expense categories.
Dave Ramsey recommends that our income be allocated the following way:
Charity (10-15%)
Savings (5-10%)
Housing (25-35%)
Utilities (5-10%)
Food (5-15%)
Transportation (10-15%)
Clothing (2-7%)
Medical/Health (5-10%)
Personal (5-10%)
Recreation (5-10%)
Debts (Hopefully 0%)
His website has a feature called "Gazelle Budget Lite" (the free version), where you can plug in your income, and it automatically figures out the budgeted amounts based on the percentages listed above. While we've made donations every month that we've been doing this, we've decided not to donate as large of a percentage of our income as he recommends. Maybe in few years, but for now we're doing what we can. We make sure that our expenses fall within his recommended ranges, and find this particularly helpful with housing and utility costs. We will draw upon this as we consider our next move in this increasingly expensive city.
What works for us may not work for everyone. I have a few books by David Bach and Suze Orman that may contain different recommendations (and if I'd ever gotten around to reading them I'd be able to tell you!). I feel that as long as we are all cognizant of our financial means, the better off we all are. To be comfortable about going out to eat because you are aware of where you are financially for the month is a great feeling! We all work too hard to not be able to enjoy it :-)
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