Today, I heard some more dismal news about foreclosures, inflation and job losses. We now have two generations of over spenders, over indulgers and “gotta have it nows”. Things are scary out there and it’s time for us all to tighten the belts and watch our spending, otherwise we will all become statistics of financial failure. But where do you start? The first step is to create a household budget.
To create a household budget system does not have to be complicated messes of spreadsheets and percentages. The biggest problem with most budgets is that after spending an insane amount of time completing it, most people save them to their hard drive or file them away in a drawer, but never put them to use. Think about it, we do not even see cash money anymore. We use debit and credit cards for everything. The paper budget is just one more way to ignore the actual money coming out of our pockets.
Below is a low tech, high success, simpler way. This is the way my 93 year old grandmother did it and with the exception of a couple of cars and 1 mortgage, she never borrowed a penny on credit. It worked for her family through difficult times, job losses, wars, layoffs and retirement. It worked for me as a working student and helped me to pay cash for college. This effective household budget system can work for you now.
Step 1: Create an accurate and complete list of all – and I mean all, weekly, monthly and yearly expenses. Don’t forget birthdays, Christmas, special events and vacations. You also should definitely have an emergency category.
Step 2: Once you have listed all of your expenses, gather enough envelopes and label one for each expenditure. For example, you will at least have one for your mortgage/rent, gasoline, insurance, groceries, each estimated utility bill, entertainment. Don’t forget the envelope labeled “Savings”.
Step 3: Before the beginning of each month, put the actual amount of cash money that you will need for each expenditure in its respective envelope. What you are doing here is physically seeing where all of your money is going.
Step 4: Now, pay for each expenditure out of these envelopes. If your envelope for gasoline is getting low or becomes empty, you may have to decide which other envelope you will steal from to fill your tank. You may have to take from entertainment or some other non-essential to cover a high utility bill. If you do, however, you will also find yourself adjusting your thermostat before the next month rolls around. You will also find yourself trying to save money on groceries, gasoline, stupid bank fees and ridiculous expenditures. If your grocery envelope is empty before the end of the month, you may have to pass on the Oreos or ice cream. One note, try to never steal from your “Savings” envelope. Also, if at the end of the month you have money left over in any envelope, place the leftover cash into your savings.
Why does this budget system work? Because rather than just writing down the numbers, you actually see the money coming in and rolling out. It becomes far more real. When an envelope is empty, it’s empty and that is a very real, very scary sight. The most important thing that you will discover is how much money you have been blowing on stupid things without realizing it. You will learn to prioritize your spending to make sure that you can cover all of your necessary expenses. Best of all, you will be taking control of your money with this effective household budget system.
See how easy it is to create a household budget!
Good luck. P.S., You’re going to love your big, fat Savings envelope.
Tags: budget, debt free, household budget, money, money management