A budget that works! How to allocate every single dollar.

I have always used a very unsophisticated budget. It was based on the 1st and 15th of every month and the due date of the bills. Bills were paid from either the paycheck from the first of the month or from the second check. For years I would have maybe $50 or maybe $200 left over that would sit in my checking but was not serving any higher purpose. Basically, I had never assigned them a job. Inevitably those dollars would disappear. They would be spent on random crap. Meaningless crap. And I even had a $100 credit card budget in my monthly expenses which is just stupid because I didn’t have credit debit but by budgeting money for it I was giving myself permission to charge away.

I have also attempted to track my spending through collecting receipts. I would use notebooks or excel spreadsheets at different times but it was too tedious and I would forget to write stuff down, especially when I used cash. And I am not an ‘app’ person. I just got a smart phone 6 months ago. For the previous 7 years I was using my LG voyager, basic calling and texting plan (R.I.P. voyager). I certainly have not enabled Apple wallet! Though the phone keeps trying. And it keeps trying to get me to buy music…no thanks.

I did however automate 5% of my pay each pay period to get deposited into my savings account. This has been a very easy way to save money and not even notice that it was coming out of my check. I learned that trick years ago from reading David Bach and it’s worked for me. I have also been stashing money away in my 403b (401k for nonprofit organizations) since Graduate School. These are good practices, but it never solved the problem of the left overs hanging out in my checking account after the bills were paid.

As you can see, the bulb was there but it was dim. I had the concept of a budget and a desire to save money but not a clear understanding of what a true budget is and how powerful it can be.


Then I borrowed a book from my public library (kicking that book buying habit right to the curb!). That book was “America’s cheapest family” and it is the best thing I have ever read on money and budgets. In chapter 3 they broke it down step by step and my light bulb had a little flicker, then it got REALLY bright! I spent a few days working at my budget and reworking the allocations until they made sense (and added up to the amount in my paycheck).

Essentially, like most people will tell you, you start by:

  1. Write down everything you spend money on. I break these into Fixed expenses like mortgage, insurance (home and auto), preschool tuition, water, electric and gas, etc… What ever expense you know you will HAVE to pay each month.  I take it a step further and look ahead. I know every two years I have to pay for my state auto registration. There is a budget for that.
  2. Next, write down the things your family usually spends money on such as clothes, food, entertainment, allowances, gifts,etc… I call these “Variables” because they are not always needs and can be cut back or cut out all together if needed.
  3. After you subtract your Fixed expenses, you have a finite amount of monthly money left. Take a guess and play with the amounts you will put into each variable category until the amount adds up to the remainder of your pay after Fixed expenses. You may need to readjust these funds several times to make it work for your personal situation. Some of my variables accounts have as little as $3 per pay period going in and others have as much as $30 per past period ($60 per month). It’s all relative to what you need.  
  4. Every pay period, allocate your paycheck into these categories and watch your money pile up. When the bill is due, there is no stress because you have the money there to pay for it. 

Magic Formula:

Monthly income – Fixed expenses = $ for variable expenses

I can not recommend this budgeting method enough. It is so simple I can NOT believe I didn’t do this sooner! It has literally changed my financial life. I have a plan and a way to get there for everything I need to pay for and goals I am working toward. I see where every single dollar is working in my life. I wish I had this tool sooner but late is better than never.


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