Frugal ’13: Budgeting

Frugal Family 2013This week I would like to talk about budgeting. Again, I know, like the post Watching Pennies, making a budget sounds very dull and time consuming. But to steal a phrase from Dave Ramsey “you don’t have time not to make a budget.”Budgeting sounds complicated, but all you are doing with budgeting is making 2 lists: income and expense. We all know how to fold a paper in half, length wise, and create two lists. I happen to love making lists so this is sort of fun for me 😉

Or if you happen to be computer savvy, there are easy and free online templates to download for this exact purpose.

I also asked hubby to chime in a bit in this post. He manages our finances and has kept us in the ‘black’ for years now while successfully padding our savings and starting my IRA. His comments will be italicized.

That tactics that I recommend come from teaching Dave Ramsey’s Financial Peace University as well as my own tweaking and contradicting of that program. So my advice is my own.

There are 2 schools of thought with creating a budget. 

1. In his program, Financial Peace University, Dave Ramsey suggests making a budget at the first of the month. Plot out every place where your money is going to go. He even offers a free online budgeting tool that takes you 60 seconds to do. You can check that out here.
If you have the will power to jump in and keep track of things, go with this first step.

2. When my husband is teaching Financial Peace University, he suggests a more eye opening approach (when dealing with young soldiers, sometimes they need to look an issue right in the face to get their attention). Hubby suggest that a person tracks all their money for a month to see where it goes.

It can shock you to see how much you spend on:

  • ATM fees
  • gas
  • shoes
  • eating out
  • cell phone (especially if you go over your plan)
  • online movies
  • apps
  • gifts
  • utilities
  • coffee shops 

 Keeping the budget

money envelopes photo: Contact Us mail-envelopes-make-money-800X800.jpgIn her post “How Can I Stop The Money Leaks?” Janis talks about money envelopes. This system has worked for my mother for decades, and she still sticks by her envelopes today. The theory is that you designate an envelope for a certain expense. When the envelope runs dry, you don’t get to spend any more money on that item until you fill the envelope again. This is a great tool for those who are visually driven. If you really have weak will power, then go this route as you are learning to budget. There is something psychological about spending cash and watching it diminish, which is why those CC commercials that play down the cash guy irritate me. The CC companies want you to be indebted to them, paying their exorbitant interest rates for months.

I’ve learned that carrying cash, budgeting, and all that other great stuff doesn’t amount to a hill of beans unless one has the will and determination to improve your financial state. If you don’t have that internal drive, teach or force yourself to learn it.

Another theory in budgeting is to have separate accounts for spending, savings, and distributing bills. This is how we do it because we are a few years into budgeting and prefer to keep the money in the bank where it collects interest. My husband gets paid into our main checking account. This account does not have ATM access! We then have our weekly budget transferred into the spending account that does have a card access. We also place whatever is left from the spending each week into a short term savings account.

Here are some of our budgeting tips:

  • Never link your savings account to a bank card. Your savings should be off limits except for emergencies


  • At the beginning of the budgeting process, put away or cut up the credit cards that cause you the most pain and are the hardest to avoid. Paying on credit takes money away from you in the form of interest when you can’t pay it off.



  • Don’t carry cash! Ramsey would disagree with me here because he rightly observes that studies who we are less inclined towards excessive spending when we use phyusical currency. But when you get into the mindset of controlling the spending, your money will make more money in an interest accruing account and not in your pocket.



  • Only go to the store when you need something, not because you are bored.



  • Make a list before you leave to remind yourself why you are going to the store.



  • Stay on track. The marketing reason behind putting milk at the very back of the store is to encourage impulse spending as you travel all the way back there and all the way to the checkout. You have a list, follow it!



  • If your eye catches olive oil or napkins and you forgot that item on the list, those are not impulse purchases. Grab the items needed for your home to function.



  • Oreos, milk duds, that cute top are not what you came to buy! It may appear to be a great deal, but I encourage you to walk away from that great deal and give yourself 24 hours to consider if that purchase will keep you from your goals, or if the weekly budget will allow for the splurge. Even good deals add up quickly and derail your budget.



  • If you must keep a CC on hand, make sure it earns you reward points! Again, Ramsey doesn’t approve of this logic because he rightly observes that 80% of people don’t pay off their CC balance at the end of the month. This means they pay extra money for borrowing money. However, we pay for groceries (according to budget), gas (according to budget), vehicle repair, and whatever else with our rewards card. We pay it off every month because we only spend what the budget says we spend. With those points, we have covered Christmas gift cards for 6 years (free to us!) and a couple plane tickets (again, free to us!).



  • Have a goal in mind! Write this goal down, post it around the house, put it on the home screen of your smart phone. Know what you are saving your money for and what the whole point of your budget is! Without a goal, you will find ‘good deals’ hard to pass up and will imagine that this purchase is what you were saving for!



I hope these tactics are helpful. Thank you, Ben, for your help with this post 🙂 If you want to read more from my husband on a range of subjects, he can be found at thebenaddiction. Please email me with any questions you may have.

3 thoughts on “Frugal ’13: Budgeting”

  1. Good plan!I can’t stand the cash envelopes myself. I tend to spend cash if I have it. I do much better like you suggested, knowing exactly what I need and how much I’m allowed to spend. The credit card ads make me nuts too! You are not getting free money, you are paying them a lot more than you are getting in fees/interest.

    1. Yea, they work for my mom and sister, but I just can’t manage something like that. And we want that money to make interest. Credit has been a pet peeve for both of us, eh?? We’re both beating it though, now!!

  2. One more thought–your budget does not recognize the phrase “I deserve.” No matter how miserable your day/week has been, or how long you have been “being good” and saving, or how proud of yourself you are for accomplishing something cool, don’t derail your budget by confusing what you can afford with what you think you should have! (Says the girl who spent 8 years racking up obscene student loan debt and thought she should be able to “spend like a lawyer” once she became a lawyer–I learned this lesson the hard way!)

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