Thursday, January 10, 2013

The Cash Budget

We've rung in the new year and made our resolutions.  I am thinking by day 10 most of us are lacking enthusiasm for the resolutions that we've made. I know I am about to restart my dieting resolution again for the third time this year, but my motto is "try and try again."

Last year, our New Year's resolution was to get financially fit.  After a year, I am going to call it a success! We wanted to prepare for the adoption expenses, as well as get an idea of where our money was really going.  I am not sure who thought of the cash budget, but we both agreed it was worth a try. I can tell you it was definitely worth it.  Having all of our expenses accounted and planned for took a lot of stress away.  It made making decisions on whether we could or couldn't do something easy. I'd thought I would share our plan. Maybe it will be a fit for you, maybe not, but I hope it inspires you to stick with your resolution.

Here's our cash budget plan:

1. First, figure out your numbers.

To figure out our budget, we started by calculating what we take home and then what are our fixed monthly expenses like rent, utilities, cell phones, internet, insurance and debt. Those bills are paid through online banking each month.  The fixed expenses are subtracted from what we take home each month and what's left is the money for your flexible expenses.  Our flexible expenses are groceries, household, laundry, pets, gifts, church, travel, personal care, allowance and savings.  We assigned a weekly dollar amount for the flexible expenses based on what we have spent in the past and what was available after our fixed expenses. Most of our flexible expenses are paid in cash. Our rule is no using the debit for flexible expenses.

2. Get organized.

We purchased a Pocket Accordion Organizer from the Container Store. Best $11 bucks we've ever spent.  I labeled each pocket in the organizer with our categories - Allowance, Groceries, Household, Laundry, Personal Care, Pets, Church, and Gifts.  Each week, we make one ATM withdrawal of the budgeted amount for these expenses and put the allotted amount in each pocket.  So, when we go grocery shopping, we can't go over the amount that's in the pocket.  If I see a pair of shoes that I want to buy, I can only get it if there's enough money in the personal care pocket. Some weeks the money in pocket isn't spent and that surplus in carried over to the next week.  The goal is to have enough money saved in each category for those things that come up like a vet visit or better yet Christmas presents.


For our flexible expenses like travel and savings, we set-up an automatic weekly deduction from our checking account to a savings account.  That money is saved until we need to use it.  Having different bank accounts might not be ideal for some, but it works for us. We rent cars a lot and you can really only do this with a credit card.  We'd put the car rental on a credit card and then when we'd return the car, we pay with the debit card with the saved travel money on it.

4. Set goals.

We set goals for the money that had not been accounted for.  We bought a new TV right before we started the budget and paid it off within 3 months.  Then we set our sights on paying off a credit card.  I cannot tell you how good it feels to get rid of bills.

3. Stay strong and make tough choices.

We made some sacrifices to realize this budget.  We decided that cable TV wasn't an expense that we needed and that monthly expense could do more good being applied somewhere else. We did splurge on a Netflix account. We also don't have data plans on our cell phones. Honestly, I don't miss either.  We bring our lunch to work and cook dinner almost every night.  We get a weekly personal allowance. This allowance is for meals out, the movies, out with friends, a new book or whatever we want to spend it on.  But when it's gone, it's gone.  I have had to decline invitations out because I already spent my allowance.  I am now very frugal about spending my allowance. I make plans with friends and set aside what I think I will spend. Using cash really makes you think about what you are spending money on.

4. Check on your progress.

When we first set our budget, we decided to set a date about three months later to check on how the budget was working.  After the first three months, we needed to make some adjustments. We had forgot all about some expenses that we had, like haircuts!  We did another check-in at the end of the summer to prepare for the holidays. 

After a year of doing this, our savings account grew and our debt was less. That is truly a great feeling.  We haven't always been perfect, but stuck to it most of the time. At the end of this past year, we sat down and set a new budget and money goals for 2013.  I wish I had done this years ago, it has been a life changing experience.  It's the best gift you can give yourself.

Want a budget wallet just like mine? Click here for the Container Store organizer. Or check out the less expensive option on below.

1 comment:

  1. Such great advice here- no surprise from someone as organized as you are! Happy new year to both of you - I know it will bring great things. :)


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