Keeping a Budget: Our Story

Since starting this series I have received emails from folks who are struggling to get by and even a little doubtful about their ability to make it.  I can relate.  I thought I’d share my story of how we overcame huge financial obstacles and learned the value of a dollar the hard way.

Four years ago when my husband and I moved to Texas, we had exhausted our savings and were literally down to our last dime.  After trying for years to struggle through the economy in Michigan, we finally decided it was time to move somewhere where the work was still plentiful.  By then we were in pretty bad shape.  We had to start over from nothing and rebuild our lives.  And by nothing, I mean $0.00, give or take $20.

I can’t say I regret the years of trying to hang on, even if it shook us to our core and drained our energy along with our bank accounts.  We were, after all, trying to maintain a life close to our family, friends and church.  If we had given up a little sooner, I believe we would have a mind full of what-ifs and regrets, wondering if we might’ve made it if we held on a little longer.  Still, it was rough.

Moving didn’t solve all our problems.  We were able to find work, but were living paycheck to paycheck for months trying to reestablish a savings.  Then the unthinkable.  Our youngest child was diagnosed with autism.  After that, every extra penny would go to his therapy.  The last thing I wanted to do at this point was empty our new savings and live more of our lives in financial uncertainty.  But looking into the eyes of that beautiful little boy, I knew I had no choice.  The experts told us he needed 40 hours per week of behavior therapy to have a chance at a normal life.  The most we could afford was 15, so we weren’t about to hold back a single dollar.

I’m not the kind of person who likes to live day-to-day.  And I admit I had a freak-out moment or twelve.  But I learned through these years to lean on God and not on my own plans because I had no choice.  The lesson learning process wasn’t pretty.  I wish I could say it was.  I’d love to say I was at the feet of Jesus, peacefully thanking Him for stretching me as a person.  But that’s not how it went down.  I was at times emotional.  Unreasonable. And occasionally I gave in to my hopelessness.  The journey wasn’t pretty.  But the destination was.  The lessons I learned about money and faith are now ingrained in me.  I promise you, these are lessons that would not have come any other way.  And I desperately needed them.

Today we are on the other side of it.  This season that seemed like it would last forever is behind us.  We budget.  We scrimp.  We save.  We coupon.  We value every dollar.  These are lessons we can pass on to our children.  And so the ugly mess we endured for years is no longer ugly at all.  Today it has become something beautiful.

“…to give unto them beauty for ashes, the oil of joy for mourning, the garment of praise for the spirit of heaviness….”   Isaiah 61:3

 After all these years, I finally have a true understanding of what that means.  Our ashes have been turned into tools that have taught us how to be better people.  I hated going through it.  I’m glad it’s over.  But I’m also glad it happened.

I’ve heard it said that our “mess” is our “message”.  If that’s true, then this is mine.  If you’re struggling in any area of your life.  If you’re suffering the consequences of your own bad decisions.  It’s not the end.  You will walk through it and you will emerge stronger and better.  Your mess will be a message someday too.  That’s the beauty of redemption.  Stay hopeful.

Our triumph over financial adversity sends one resounding message.  If we can do it, anybody can. It’s not about being good enough or having family support or an ideal career.  It’s only about daily choosing to put one foot in front of the other and walk through it, learning as you go and having faith that all will work together for good.  It’s about wanting it badly enough to make changes.  You can change your financial story.  No matter where you are now, you can transform your mess into wonderful story of hope.

Set up your budget.  Stick with it.  Use cash envelopes and spending journals and any tools that will help you.  Try new things.  If you fall down, get back up and try again.  Set big goals for yourself to keep you on your financial path.  We did it.  That means you can too!

Photo Credit: Pinterest

Budgeting Success: Keep a Spending Journal

If you have been less than successful at previous budgeting attempts, consider keeping a spending journal. Often the culprits of overspending are hidden in daily nickel-and-dime purchases. A Starbucks here. A trip to Target there. When we are able to reconstruct our spending over 4-8 weeks it allows us to see the big picture of where our money is going.

Recording With Your Cash Envelopes
Keep track of your spending by documenting cash purchases made with your envelope funds. When I was keeping a spending journal, I would save receipts for purchases right inside the respective envelope. At the end of the week, I’d have a few dollars and several receipts which could be tallied up and examined.

Recording Discretionary Spending
For most folks, this area of spending is where they are seeing the largest budget-busting activity. These are purchases that are not in any specific budgeting category, and may come from a “discretionary fund” you have.  Resolve to keep a notepad with you to jot down all discretionary purchases. At the end of the month you can evaluate where your money is going and be mindful of spending traps. Moving on to month two, you will likely see improvements in all areas because you are more aware. Continue your journaling until you feel like you have all discretionary spending under control.

Another option.  Consider eliminating this budget category altogether and instead assign every dollar a specific job.  That doesn’t mean you can’t go to Target or Starbucks, but it does mean that all spending will be deducted from a specific category and will consequently give you less to spend later.

Have you ever kept a spending journal? Leave your thoughts in the comments!

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Managing Money Using Multiple Accounts

We are fortunate to live in an area where free checking accounts abound. No fees, no penalties, no minimum balances. This has helped us tremendously in managing our money. My husband and I each have a checking and savings accounts, along with a joint savings account at Capital One 360 (formerly ING Direct). This gives us five ways to divide our money for spending, saving and debt payoff.

How We Arrange Our Accounts
Checking Account #1 is for bill paying only. It is also our primary account, so all income is deposited here and distributed to the other accounts (or withdrawn for cash envelopes). We have a monthly dollar amount that remains in this account to cover bills, and all the rest is assigned a “job” by being deposited into other accounts.

Checking Account #2 is for debt payoff only. We have a set dollar amount that is deposited into this account each week, but we have also decided that any extra or unexpected income will be allocated to this cause. Bonuses, tax refunds, etc. At the end of the month, we write one big check to chip away at our bills.

Savings Account #1 is for short term savings. If the kids want to go to summer camp or if we are planning a trip, the money comes from this account. We have a strict dollar amount that is assigned to this account and have decided not to add extra until our debt is 100% paid off.

We also have a cash envelope for short term savings.  If we have a planned purchase to make, this envelope is funded from the savings account.  Otherwise we keep a small amount in this envelope for unexpected things.  Last month one of my children asked if they could take an art class that was not in our budget.  We used the cash from our short term savings envelope to pay for it and decided our present savings goal could wait a little while longer.  I’m not sure how Mr. Ramsey would feel about this, but we like to have a little wiggle room for the unexpected, so this works for us.

Savings Account #2 is for emergencies. This account is fully funded, but we still add a small dollar amount every month.  According to Dave Ramsey, getting $1000 into an emergency fund is your first baby step toward financial freedom.  Later on in the program, you add to it until you have 3-6 months expenses saved.

Capital One 360 is for long term savings. Presently we are saving for our Roadschooling Trip!  We use this account because they provide free automatic deductions from our bank account so saving is easy.  They do not charge any fees or require any minimums.  We do not have a debit card associated with this account so in order to make a purchase we must request a transfer, which takes 3-5 business days.  This means it’s a little more difficult to get to the money, which I like for long term savings purposes.

Other Accounts
These five accounts make up our living funds. I also have a Paypal account/debit card that is used for online purchases and funded with money I earn online.  Other accounts such as retirement, college funds and health savings are separate. I’m no financial expert so I’ll leave that up to you. We chose our funds with the help of a Dave Ramsey approved financial advisor.

What About Giving?
Since I’m the type of person who does not like unexpected financial hiccups, we have our giving automatically deducted from Checking Account #1. Many churches and non-profit organizations can set up monthly deductions for you. This may not be the right thing for everyone, but it works for us. If we decide to give beyond our automated deductions, we use our short-term savings.

I am not a financial expert.  Just a mom.  This setup may not work for everyone.  The reason we decided on this system is because I found we were overspending when we had a little extra money jingling around in our checking account.  Assigning a purpose for every dollar has challenged me to stay on budget and avoid impulse purchases.

If you have some ideas or advice for staying on budget, please share in the comments!

My #1 Trick For Staying On Budget Every Week

For most folks, creating a budget is the easy part. The challenge comes in managing to keep it. I’ve found one simple trick keeps our family on track better than anything else. The Once-A-Week Spending Rule.

We have exactly ONE DAY PER WEEK that we allow ourselves any bank transactions. That’s it. This is the day we pay our bills, get our groceries and fill up our gas tanks. We also withdraw any cash we will need for our cash envelopes (more on that later).  It’s a pretty simple trick, but it works better than anything we’ve ever tried.

Choose Your Spending Day
Ideally, you will be able to choose the same day every week. It should be a day when your deposits have cleared and you have enough time to pay your bills, update your budget and withdraw your cash. The important thing is to keep yourself committed to doing all financial transactions (except cash) on one day.  The remaining bank balance can be allocated to bill payoff, emergency funds or savings accounts.  Just make sure you have assigned a task to every single dollar so you aren’t tempted to spend.

Use the Cash Envelope System
We are big fans of the cash envelope system in our home. It’s an invaluable tool for keeping us on track financially. With regards to the Once-A-Week Spending plan, withdraw a set amount for each cash category and add it to the envelopes. Once it’s gone, it’s gone! Our categories are: clothing, food, auto/gas, birthdays/holidays and short term savings.  The money in our “food” envelope covers groceries, school lunches and dining out.  When I save big bucks at the grocery store using coupons, I have ample funds left over for a nice restaurant meal with the family.  When I don’t, we don’t go.  How’s that for incentive?

No More Impulse Purchases
When left with a specific amount of cash for six days, I am forced to be more mindful of my purchases.  For example, if I plan a trip to Target to pick up a few sale items, I will not be tempted by the clearance holiday items or the new candles or any of the other trinkets that use to find their way into my cart.  I know that if I indulge myself, I will pay for it…and so will my family.

What About Emergencies?
Emergencies are our only exception to the rule.  The Once-A-Week Spending Plan has enabled us to have a well funded emergency fund because we no longer give in to impulsive purchases. If the air conditioner breaks or the car needs servicing, we are able to use an account we have specified for emergencies and take care of it.  It’s important to have an understanding with all members of your family as to what constitutes an emergency so you’re all on the same page. For us, it is a dire need that will adversely affect our ability to function: car maintenance, home maintenance or health care.

What About Online Purchases?
I have a separate account that I use only for online purchases. I think of this account as an envelope. It’s my “online envelope”! I keep a specific dollar amount in it, and when I use this account, I replenish the funds by depositing cash from the appropriate envelope to get the balance back up to the original amount. Make sense?

Example: Most often my online purchases are for clothing.  After making a $50 purchase, I remove $50 from my clothing envelope and deposit it into this account so the balance always stays the same. It may seem like a lot of extra effort, but I do this sort of banking monthly so it doesn’t cost me too much time. Plus the benefit of staying on budget far outweighs the inconvenience.  Doing online shopping this way means I am still on budget and not overspending.

Tweaking Your Cash Envelopes
If you don’t have a clear idea of how much you need to spend each week on food, clothing, etc., it is likely that this new system will need some tweaking. Don’t be discouraged if the first week is rough. Just reevaluate your spending needs and make adjustments to the amount you add to each envelope. Continue modifying until you find the appropriate amount. It may help to start a Cash Journal, keeping track of all your spending for 1-2 months. This will help you see the big picture of where your money is going, and inspire you to reel in spending in some areas that may be a little out of control.

I have had great success by limiting my financial transactions to one day per week. My debit card is no longer overused as it once was. We have seen great improvements in our savings and debt payoff as a result of leaving the bank accounts alone all week too.

Share in the comments if you have additional tips for staying on budget.

Stay on Budget Every Week

During the first few months of the year I receive several emails asking for tips for staying on budget. With the holidays behind us and summer vacation looming on the horizon, folks are looking for a system to keep their spending in line with their goals. For the next week, I’ll be sharing my tips and tricks for managing our household budget.

Your Budget
If you don’t have one, this is where you need to start. The first step is determining which type of budgeting system best fits your life. Here are a few options.

Option #1 Old School
There’s no school like it! If you prefer to have your budget written on paper, here are some freebies you can snag.

Option #2: Web & Mobile
Here are some popular mobile & web budgeting tools to check out:

  • YNAB (you need a budget) – very popular, but a little intense.  Extremely thorough and no monthly charges.  Pay $60 once and it’s yours forever.
  • PearBudget – simple to set up and 30 day free trial.  After that it’s $4.95 per month.
  • Mvelopes – set up “spending envelopes” within your account, track your spending and stay on budget.  This one is free.
  • BudgetTracker – another free program that can be viewed on your mobile device.
  • Dave Ramsey Gazelle – Dave is the man when it comes to budgeting.  The only thing that has dissuaded me from using this one is the whopping $90 per year fee.

I am pretty old school when it comes to budgeting.  We use a free printable calendar from Microsoft Office. Simply download, then delete any unnecessary text or images, and use the text box to list monthly bills. As they are paid, they are crossed off.

In the calendar section we write in our income, along with dates we plan to pay each bill. Savings and giving are also scheduled.  Since we are self-employed, our income does not come at regular intervals so this works well for us. We have a separate page with addresses, account numbers and passwords for each account.

ACTION PLAN: Create (or tweak) your budget today. Later in the week we will discuss organizing your accounts and I’ll share my #1 secret for staying on budget every month.

Please leave a comment and share your favorite budgeting software, app, printable or any other tips!