begining budgeting help

[emcare]

I'm super new to this "being responsible with your money thing", so please be patient with my noob questions.

So, at this point I'm feeling pretty hopeful about our money situation for the first time since we got married. We don't make much, but we are at a place where we can actually pay all of our bills, feed the family, and even save a little for the first time in our marriage.

Last night the hubby and I sat down and made a budget using Dave Ramsey's long form. We know that on paper, we can do this, but my question is how do we actually start?

For example, I feel like we are always robbing peter to pay paul and just can't catch up on our bills and things. I love the idea of using an envelope system, but my husband doesn't get paid for a week and a half and by that time we will need to pay the mortgage and a couple other bills, so how do we fill up our envelopes? Won't we still be living paycheck to paycheck?

And how exactly do you do a monthly budget when you get paid every two weeks? I can figure out how much we make a month, on average, but what about what actually comes home. It varies depending on how many pay periods per month, so should I really be budgeting per paycheck or per month? Per paycheck seems to make more sense to me, but then again, we run into problems while we are just beginning. How do we get ahead enough so that when the mortgage comes due, we have it all and not just the half we will have in a week and a half?

Oh, man. This post is a jumbled mess. I'm sorry. I think I'm having a hard time asking clearly what I want to know because my head is kind of spinning right now.

In any case, any beginning help would be appreciated? How do I start when I feel like I'm already behind?

[root*children]

So, you've already made a budget. Yes, it's monthly, since that's how often you get your bills. How much you put in your envelopes is dependent on what percentage of each paycheck goes to the bills. You said you are feeling hopeful about money, that you are even saving some, so it doesn't sound like you are paycheck to paycheck at all.

Get your envelopes ready, label them with what percentage goes into each (or if DH's paycheck is the same every pay period, you could just write a dollar amount), and start filling them next pay check.

[cappuccinosmom]

If your bills are monthly, then it seems simplest for the budget to be monthly.

Your dh gets two paychecks a month. So add them up (Use the number that's in the after-taxes line) and the total is what you have to work with for the month . That is what goes in your "Income" category at the top of your monthly budget. If you have bills that are on a mid-month cycle, then you know those are the bills that you will pay from the first half of your monthly income, that arrives in the form of your dh's two-week check.

You will only be living "paycheck to paycheck" if you don't make savings a part of your budget. It can be $50/month, but it needs to be deliberately included or you will find things to spend it on, and then you will be doing the check-to-check thing. Budget for two paychecks a month. When the odd 3-check month comes around (can't be more than 2-3/year, iirc), put it into savings and use that as a step to "get ahead". If you don't have a cushion, then yes, you probably will run into trouble.

FWIW, I have never found the envelope system to work for me, and I cannot for the life of me understand how a "zero balance" bank account works as Dave Ramsey describes it. I am not good enough at math to do the zero balance thing and avoid overdrafts.
Instead, we sock as much money as we can into our checking account, and spend as little as we can. I have a notebook with a folder for each month, to record our income and expenses. That's more of a retroactive thing, and gives me an idea of our income to expense ratio, and alerts me if grocery or household spending got a little out of hand the previous month. I know generally what we spend for each budget category, make a big effort not to exceed the norm, and it's well under our actual income.

For instance, dh usually brought home two checks every month that were around $960. So a total of $1920 of "real money" that I could count on having. Before we got rid of the mortgage, we had a $460 house payment. Then about $200 in various utilities (electric, gas, phone, water/sewer). Then about $450 for groceries and household items. $60 for car insurance. Health insurance came out of his check before it got home, so not in our budget. Another $150 for gas for the car. So we've taken care of necessities and still have around $600 left. That went into the bank not to be used unless necessary. So there was our "wiggle room". Any time dh had the extra paycheck, that also went straight into the bank. Any gifts, bonuses, and tax refunds went straight into the bank. That was how we "got ahead" so that we were at a place that we didn't have to worry whether there would be money in the bank to cover a check we'd just written. It also gave us the ability to save up and pay cash for things like cars (used, of course), so that a car payment wasn't on our back every month, and pay our property taxes without worrying, and also pay our home insurance in a yearly lump sum.

I know we had a very low income and very low COL, but the same way of doing thing can apply with proportionately higher income and COL.

[BetsyS]

I like to spend money, though I love to get a good deal. I could "good deal" us into the poor house (and did good deal us into a lot of debt), so I need the structure of a zero line budget. I like knowing that I have $150 in my grocery budget, I can spend all of that with wild abandon , and then, when it's gone, it's gone.

For me, this means that I list out ALL anticipated expenses for the year. I have a line item for car insurance. We only pay this every 6 months, but once a month, I put 1/6 of that cost into that envelope. At the end of 6 months (when it is due), then I have all I need for that expense. I do this for all annual/semi-annual bills, such as the tags for the car, the deductible for our health insurance, etc.

I do the same in other "want" (versus need) categories as well. Add up your average cost for the year for clothing, then every month, put that money aside in the clothing envelope. Sure, there are some months that you won't spend any. But, other months may find 3 people needing new shoes, another needing new underwear, and another needing a new shirt. You've got the money set aside for that.

I try not to have to use our emergency fund for anything that I can foresee as a need. Thus, savings doesn't get used for clothing, for gifts, for auto maintainence (and preferably not for repair, but sometimes the bill is too large), for household maintainence, that sort of thing. It gets used for true things that you can't anticipate. My goal is to never touch that emergency fund.

[RunningMomTegan]

I found that I use the envelope system only for certain things. Groceries, "fun money" and clothing. Gas we use a CC (this is the only thing we use it for), and earn rewards while not having to haul kids into the store to pay with cash.

Everything else I manage in various accounts with the bank online. We have USAA banking, which doesn't have local branches, so depositing cash (in the event I want to pay a bill using cash I've saved) isn't an option. It has taken about 6 months to work out the system that works really well for us.

[emcare]

Thank you all for the help. I'm sure I'll have more questions as we begin this journey.

Originally Posted by cappuccinosmom

Budget for two paychecks a month. When the odd 3-check month comes around (can't be more than 2-3/year, iirc), put it into savings and use that as a step to "get ahead". If you don't have a cushion, then yes, you probably will run into trouble.

FWIW, I have never found the envelope system to work for me, and I cannot for the life of me understand how a "zero balance" bank account works as Dave Ramsey describes it. I am not good enough at math to do the zero balance thing and avoid overdrafts.
Instead, we sock as much money as we can into our checking account, and spend as little as we can. I have a notebook with a folder for each month, to record our income and expenses. That's more of a retroactive thing, and gives me an idea of our income to expense ratio, and alerts me if grocery or household spending got a little out of hand the previous month. I know generally what we spend for each budget category, make a big effort not to exceed the norm, and it's well under our actual income.

For instance, dh usually brought home two checks every month that were around $960. So a total of $1920 of "real money" that I could count on having. Before we got rid of the mortgage, we had a $460 house payment. Then about $200 in various utilities (electric, gas, phone, water/sewer). Then about $450 for groceries and household items. $60 for car insurance. Health insurance came out of his check before it got home, so not in our budget. Another $150 for gas for the car. So we've taken care of necessities and still have around $600 left. That went into the bank not to be used unless necessary. So there was our "wiggle room". Any time dh had the extra paycheck, that also went straight into the bank. Any gifts, bonuses, and tax refunds went straight into the bank. That was how we "got ahead" so that we were at a place that we didn't have to worry whether there would be money in the bank to cover a check we'd just written. It also gave us the ability to save up and pay cash for things like cars (used, of course), so that a car payment wasn't on our back every month, and pay our property taxes without worrying, and also pay our home insurance in a yearly lump sum.

I know we had a very low income and very low COL, but the same way of doing thing can apply with proportionately higher income and COL.

I cannot tell you how helpful this is to me. The idea of budgeting for two paychecks a month and then any extra is actually extra was super awesome. I mean, it's simple, but I honestly just never thought about it.

We make a very similar "real money" amount and have a similar col at this point, so that's even more helpful. But, a lot of our expenses are still higher than yours and I'm working on getting them down. It looks like Betsy talked about this, but how do you budget for things like license plate renewal, christmas gifts, etc.? Stuff that comes once a year? I feel like, especially while we're just starting out, it would help to have every. single. thing. that we will spend money on in the budget. Do you just have a lot of self control and keep those things in the back of your mind when deciding what you need to spend your wiggle room money on?

Originally Posted by BetsyS

I like to spend money, though I love to get a good deal. I could "good deal" us into the poor house (and did good deal us into a lot of debt), so I need the structure of a zero line budget. I like knowing that I have $150 in my grocery budget, I can spend all of that with wild abandon , and then, when it's gone, it's gone.

For me, this means that I list out ALL anticipated expenses for the year. I have a line item for car insurance. We only pay this every 6 months, but once a month, I put 1/6 of that cost into that envelope. At the end of 6 months (when it is due), then I have all I need for that expense. I do this for all annual/semi-annual bills, such as the tags for the car, the deductible for our health insurance, etc.

I do the same in other "want" (versus need) categories as well. Add up your average cost for the year for clothing, then every month, put that money aside in the clothing envelope. Sure, there are some months that you won't spend any. But, other months may find 3 people needing new shoes, another needing new underwear, and another needing a new shirt. You've got the money set aside for that.

I try not to have to use our emergency fund for anything that I can foresee as a need. Thus, savings doesn't get used for clothing, for gifts, for auto maintainence (and preferably not for repair, but sometimes the bill is too large), for household maintainence, that sort of thing. It gets used for true things that you can't anticipate. My goal is to never touch that emergency fund.

This is great. Thanks so much.

Originally Posted by RunningMomTegan

I found that I use the envelope system only for certain things. Groceries, "fun money" and clothing. Gas we use a CC (this is the only thing we use it for), and earn rewards while not having to haul kids into the store to pay with cash.

Everything else I manage in various accounts with the bank online. We have USAA banking, which doesn't have local branches, so depositing cash (in the event I want to pay a bill using cash I've saved) isn't an option. It has taken about 6 months to work out the system that works really well for us.

Yes, I have the feeling that if we can just stick to our budget, it will take a little time to figure out exactly what works best for us.

[cappuccinosmom]

It looks like Betsy talked about this, but how do you budget for things like license plate renewal, christmas gifts, etc.? Stuff that comes once a year? I feel like, especially while we're just starting out, it would help to have every. single. thing. that we will spend money on in the budget. Do you just have a lot of self control and keep those things in the back of your mind when deciding what you need to spend your wiggle room money on?

I have to say, it's mostly due to dh's influence, but yes, we pretty much don't spend extra money until it's necessary. That way the "extras" pile up so that writing a yearly check isn't a big deal or a budget ruiner.

We have been conciencious about our budget for several years. If this is new to you then it might help to have a list of yearly or occasional expenses that are going to crop up. One thing you might do is have all your finance stuff in one place, and have a calendar at eye level with the dates of these occasional expenses. So if you have to renew your car registration at the end of July, when you flip the July page up on the calendar, that note is staring at you all month, and you can remember you need x amount of money available so July is not the month to do a lot of extra spending. I still occasionally do that for myself, usually when I can see we've got a crazy busy week coming up, which is when I'm liable to ignore my budget folder and forget bills are coming due.

For Christmas we do things totally different than most. Extremely frugal, and very low-key. I have extra in the budget for holiday food and hosting meals. For gifts, I do some very minimal free lance writing ($30-$50/mo) and that covers the small gifts we give, as well as birthday treats and other things throughout the year that are just for fun.

[BetsyS]

Twice a year, we get those 3 check months, and one of those is used for vacation, and one for Christmas.

I budget a handful of things on a two week cycle (versus the once a month of most other things). So, I take out our giving, gas for the car, and groceries, then the rest of the money is "extra".

Now, to be honest, it isn't a huge amount. This year's "vacation" fund is being used to pay some of the extra expenses of having a baby (eating out for dh, parking at the hospital, extra gas for all those appts), plus a trip to see family at the holidays (extra gas, food, etc). Maybe, if we're lucky, we'll eek out a night of camping in the fall. So, it isn't like it's paying for a trip to Hawaii or something.

When our income used to be higher, I just took out an amount and put it in savings each month for vacation/Christmas, and then, the 3rd check provided more of a cushion in our accounts. but, these days, I can't seem to eek out as much from our budget as I'd like.

[nd_deadhead]

emcare, first you should pat yourself on the back for starting to work out a budget system now, before you get yourself buried in a pile of debt!

You've gotten lots of good suggestions - I thought I'd throw out a few more ideas.

The first is to direct depost some of DH's paycheck into a savings account. His check gets smaller, but it's "out of sight, out of mind", so it's less likely to get spend on unnecessary stuff. This is part emergency fund, part annual or semiannual expenses (car insurance and tags, Christmas, car maintenance, etc).

After that, you'll have to figure out what works best for you - a cash system for some things, like groceries and household supplies, might force you to be very frugal about those items, at least until you have more of a cushion built up.

I know that the every-two-week paycheck is a pain. I get paid twice a month; DH gets paid every 2 weeks. I have a calendar in my budget notebook that notes his paydays, so I don't get confused.

Most of my bills are constant from month to month - mortgage, car payment, gas/electric, cable, insurance, etc. Some are due at the beginning of the month, others at the end of the month. Can you adjust the due date on any of your bills, so they are more spread out?

Here's a trick that might work for you, in terms of not overspending: at the beginning of the month, write out the checks for your known beginning-of-the-month expenses (you might not mail them until payday, which could be a week later, the way the 2-week check schedule works out). Once those amounts are subtracted from the check register, the money is no longer there to spend. Do the same thing on the 15th or so, for the end of the month expenses.

If you are very careful for a few months, you will have enough of a cushion built up that you don't have to worry so much about when the next paycheck comes - especially when that odd third check comes in.

And to help prevent an overdraft? Subtract $50 or $100 (as you can) from the checking account balance, so you still have that money in the account, but it doesn't show up on your balance. Again, it's just a trick, but when it's out of sight, out of mind, you are less likely to spend it. Just remember not to add it back in when you balance the checkbook!

Good luck to you - in a year you're going to be giving advice here, instead of asking for it!