Creating My First Real Budget Step #2

OK – so you started your second bank account that you only pay bills out of. You transfer money each time you get paid to cover all your monthly bills. Great … your are at the point that if you keep up with this, you won’t bounce a bill payment again! WOOHOO!

Now you need to think about tracking what you need to pay and have paid. I made up a simple sheet in MSWord using the table functions. The top of my sheet has the month (ex June) and the year (2010). Then the table has 5 column’s and about 35 row’s. The top of each column I have the date we get paid that month (Tuesday’s) and the amount we got paid (total bills and spending money).

The next row I leave blank to help keep things easy to see at a glance.

The 3rd row starts the rows of things my husband pays (his car gas and credit card – each gets its own line) when that is done I have a row for the amount he is responsible each week for paying. Then when he pays it, he tells me and I go to the Format drop down menu and click on the Font and then click “strike through” so I know it has been paid.

After my husband’s finical responsibilities for the week, I skip a line and start the bills I take care of.

In my section the first line is the AMOUNT I TRANSFFER to the household account each week. Its easy to look at and get done ASAP even if I don’t have time to sit down and pay bills, I can take that amount out of our other account and I KNOW bills are now covered and pay them later that week when I have time.

I start with Rent as the top of my list. Then I have all the bills I pay online in the lines below those. At the bottom of my list is the bills I pay by check through the mail. Then when they get paid it, I go to the Format drop down menu and click on the Font and then click “strike through” so I know it has been paid.

Now that you have made up your monthly list of bills that need to be paid and when they need paying, see what bills you can pay more often (mostly your debt). For example, we pay our credit card bills each week. By doing this our monthly payments have gone down a total of $60 a month! It’s because the interest doesn’t have time to build up as much. So we will pay off our debt faster and for less then just by paying the min due each month. It works for me! If you pay your student loans or other loans on line you may be able to do this with them as well. Just check to make sure you don’t have early payoff penalty’s!!

At the bottom of the sheet I also list our debt and approx how much we own and I update it 2 times a year and I LOVE when I can cross out one of our debts as paid off on that bottom part of the sheet!

Creating My First Real Budget Step #1

I started this way of balancing our budget 2 years ago. Back then we were living paycheck to paycheck and living out of one bank account. We would bounce a bill payment a lot more then I want to admit. Just trying to pay for groceries and car gas … I would miss writing down one thing or my husband would forget to tell me another thing and poof NSF fees everywhere! We are still living paycheck to paycheck, but haven’t bounced a BILL payment since then (we have gone under on our spending IE groceries and gas accounts from lazy record keeping and lack of communication, but at least no bills have gone unpaid!)

OK – here is the plan. Have a “household” account separate from your spending account. The household account will be the account you write your checks from, or have your bills come out of however you are most comfortable doing it. We get paid weekly so I added up our bills and divided by 4. Each week I transfer that amount into the household checking account. I started this 2 years ago when we got our tax returns and put one MONTH of payments into the household account so that we have everything one month in advance. And always be ahead of the game. Also I round everything up to the nearest dollar amount. This way when the once a year bills come due I have extra, and usually enough to pay it. Even if I don’t it’s NOT such a big deal on the budget. One more thing that really helps is when that extra paycheck comes (the 5th week of the month happens 2 or 3 times I year) I transfer as normal to try and get ahead.

Honestly we are not as ahead as we should be. When we had things like unexpected Dr’s bills or my husband got a ticket, we had to use the stuff I saved in reserve for it – but at least it was there to use.

My long term plan with this payment system is that we keep adding to our account as we get those 5th weekends in the month as well as adding more each time we get a tax return. We can’t put all of our tax return to it, but some. We will keep adding to this account until we have 3 months worth of money in it to pay for bills and ultimately 3 months worth of food money. That way if we have some unforeseen issues, we can live for 3 months with a little less worry.