Sep. 1, 2008 - Organizing Your Finances: Part 3
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In step 3 of organizing your finances I propose that it is time to set up where your money is going to go each month, yes, a budget.
I set up our family budget in Excel but you could use paper and pencil just as well. I have my budget categories on the left side and the headings of “estimated expense”, “actual expense” and “amount left over”. I like knowing that if I have a surplus in one category that I can roll the money to cover another category. Now you can set up your budget with all of your expenses and list everything out. If you have extra left over after paying all household expenses and the minimum on the debts, start applying all the extra towards the debt with the smallest amount, not interest rate. This is where I recommend Dave Ramsey’s books or his website for more details on a debt snowball. The simple Dollar wrote a review on one Ramseys books here. Here is a handy online calculator to help set up a debt snowball plan.
I love having a budget. It lets me feel like I am in control of the money instead of the money controlling what I do. I decide each and every month what I want my money to do for me and then put it into a budget category. This plan has worked for us for the past several years. I have been able to be a stay at home mom to our five kids and John has been able to support all of us. We just decided a few years ago that we didn’t want to be in debt and we did not want to live a life so stressed out.
Our goals now, are to always pay cash for our vehicles, to pay off our home early, to set money aside for retirement, and to maintain 6 months of living expenses in the bank at all times. We do plan on some vacations but for now camping and visits to family have been great for us.
What are your goals?
One other technique I wanted to share is our budget binder. It is simply a 3 ring 1 inch binder with lots of clear sleeves inside.
Inside the binder:
1. Budget: printed off and in the first slot
2. Bill Calendar: a plain 12 month calendar that I print off and use to write down the exact date I expect to pay a bill
3. A color photocopy of all the cards in my wallet and John’s too
4. A list of all online passwords and websites that we frequent: be sure to include any trust words, hints, codes etc
5. Any goals lists I have made
6. My financial update worksheets that I create to show where we stand currently with our savings and goals
7. Any major financial paperwork
8. My checkbook register: I print one that is half the size of a sheet of paper and stapled together so I can easily reconcile it and see what is written down
9. A folder in back for tax papers for the next year
10. All information about life insurance, typed up on one sheet of paper with all details: no need to make this confusing because if one of us ever needs it we won’t be thinking clearly anyway
