What Budgeting System Works for You?

Updated on December 28, 2012
J.F. asks from Milledgeville, GA
15 answers

My husband and I are planning on improving our money habits in 2013. We make a comfortable combined income, but we don't save as much as we should, especially for retirement. We also have a tendency to blow money on "fun" things we could do without. We are fortunate to have no credit card debt, but we do have a car payment, our mortgage and a couple of sizable student loans.

Figuring out how much to budget for needs and wants won't be the hard part -- the bigger challenge will be finding a solution to control our cash flow. Currently we put almost everything on our American Express card because of the reward points we accrue. We *do* pay the balance off in full every month. However, this also leads to overspending since it's easy to swipe the card without thinking about how the charges are racking up.

I know a person who uses the envelope system (cash in different envelopes for different expenses, and when that money is gone for the month, it's gone). That's one possibility for us. I would love to hear about other solutions that have worked well for you or for people you know.

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So What Happened?

These are GREAT tips. Thank you all so much. I think we are going to put all of our non-negotiables (mortgage, bills, groceries, etc.) on the card to get the points, and do a modified version of the envelope system for everything else. Here's hoping we are successful!

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answers from Columbia on

@ Tina M - In the envelope system you SHOULD have an envelope for emergencies or unforseen expenses. If you really follow that program it explains all about what should have an envelope.

Try Dave Ramsey - lots of people swear by this method.

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answers from Chicago on

It has taken years for me to find a systematic way to control our spending. My husband works construction and his pay is always different. (He once made $100 in one month!) I used to say "oh we only need $300/week for bills and gas" but I would then spend the extra and couldn't save for the weeks he made under $300.

I now use 50% Needs / 30% Wants / 10% Emergency / 10% Long Term Save

I've been doing this since the end of summer and I can't wait for next year! It really is working for me.
Our income is low, so I never get to save for long term. I usually have to use the emergency $ to make up for a bad week. This system has helped though so that we aren't spending more than 30% of our yearly income on our wants. I include my gas in the wants since I'm a stay-at-home mom and only use gas when I want to go somewhere.

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answers from Jacksonville on

First, I do suggest trying the envelope system. Even if you don't stick with that plan long term, it will help you get a handle on controlling those impulse purchases. Even if you only do it for 2 or 3 months. Surely you won't lose out on enough "perks" during 3 months that you can't justify trying it.

Second, I also agree with the suggestion to "pay yourselves first". That is what I have ALWAYS done. Husband, too, even before we were married. You have an auto-payment/deduction made every month. If you have direct deposit, schedule it to coincide with your payroll schedule. For example, husband has an allotment scheduled out of his payroll that automatically is deposited into our savings account. Every paycheck. It just isn't "there" in our spending money. We never even see it in our checking account. No chance to spend it if it isn't there. If you can't do it thru an allotment like that, then have an auto transfer done from your checking into your savings with the same concept. Mentally, that money just isn't there, so you can't spend it. You didn't deposit $1,000. You deposited $900 (because you simultaneously transferred $100 to savings). (or whatever your numbers/goals are).

If you want to continue to earn perks with your amex, then pay your mortgage, electric, gas, etc with it. But pay everything that isn't a flat/standard bill with cash. Buy your groceries, your dinners out, your drive-thru stuff, your coffee drinks, etc... ALL with cash only. Figure out in advance how much you want to allow yourself for each major category, and then put the cash in an envelope for that only. When it is gone, guess what? You are done spending until the next paycheck.
It will teach you to re-think whether you REALLY want that $5 venti gingerbread latte, or would be happy with just a plain coffee ($2), or skipping it altogether.

I'd suggest that before you start, you keep a log of your spending for about 2 weeks. Write down EVERYTHING you spend, including those coffees or packs of gum or that magazine or the amazon purchase or the app download. EVERYTHING. Then, at the end of 2 weeks or a month, go back and total up some general categories and look at what you actually spent money on. Are you spending more on fast food drivethru than you expected or wanted? Or app purchases? Or _____?

Now, take out a tablet and list the categories that you HAVE to spend (like groceries and gas for the cars). Then make a separate list of categories that you know you WILL spend in, even though they aren't necessary.
Use your past spending record to estimate how much to budget for the necessary items and write it down (and take out that amount of cash for the next payroll period). If you spent $200 on groceries, then estimate $200 for groceries and put that amount of cash in an envelope. When it is gone, no more grocery buying. It WILL go quicker than you think. And half way thru you will notice how empty the envelope is getting.... don't cheat. Learn to tell yourself "no" instead. And plan better for the next pay period.

Then, estimate what you think is REASONABLE to spend in the other categories. Maybe you spent $30 last pay period on coffee drinks away from home. Maybe you think $20 is more reasonable and would like to cut back. So budget yourself $20 (and put cash in an envelope for it). When the $ is gone, no more coffee out. Or whatever your categories are. I do not recommend eliminating something completely, just set limits and force yourself to live within them. Your sense of empowerment will grow even as you are frustrated by having to go without something you ordinarily wouldn't.

Once you have lived within an envelope system for a few months, you CAN switch back to plastic. But it is easy to slip back into your old ways. Don't forego writing down all you have spent AS YOU SPEND it. And don't forego sitting down and writing out a budget each time you are paid. That lets you know how much is "allowed" if you are going to reach your goals. Having a tally of what you are spending does no good if you don't know where the "stop" limit is. So be sure you set one. Every paycheck.

As for generally setting aside savings? There is nothing better than paying yourself first. Whether it is handled thru a payroll office and allotments or you set up a direct deposit from one account to another (that you know is "hands off").

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answers from Dallas on

First, decide how much you can afford to save a month. Commit to it. Have that amount automatically go to your savings account. In other words, pretend it never existed and live off your new, lesser, pay check.

We also charge everything for miles, but we keep every receipt and log it. That way you can see what you are spending on a daily basis. There are tons of phone apps with balance sheets. So..... all you have to do is put in the amount you can spend for the week and subtract from it with each and every purchase. When you can actually see you will run out of money it helps with your choices.

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answers from Nashville on

Have a good amount of the cash you get be automatically deposited in an account that has no cards, no easy access or withdraw ability so that each time you get paid you can save it. Out of sight, out of mind. Work with what you have and lower the limit of your American Express card.



answers from Chicago on

We max out savings for our 401k retirement, and our HSA and then i make a budget. I highly suggest you start the year by coming up with a 5 year financial plan. Go to the library, get a beginner book, and sit down and write out your priorities.

We don't do an envelop system because I like my Amazon rewards too much. We always pay off our cards, and we have a general budget we kind of keep too. I have a general sense of how much hubby spends a month, and then I know how much I can spend. Some months we go over, others we go under.

I highly recommend mint.com to see where your money is going. You can even link your student loan to it.

I also recommend dividing up your expenses and money by setting up different accounts. We have two checking accounts, and tons of saving accounts. At our credit union, we have a checking account that pays our mortgage and our car loan. This account also pays out into a general savings account and an emergency account. The savings account is for annual bills, like house, car, life insurance, etc. I figure out how much needs to go in for the year to meet those needs, and then just do automatic monthly withdrawals from the checking into this savings. I also have automatic withdrawals into the emergency account. At the credit union, I then have "other" savings accounts for special priorities. For instance, we have one for Ireland (hubby's folks live there), Beach holiday, and a new house/build fund. These accounts only get funded about once a year, come tax return/hubby bonus time. I divide that money up and feed these accounts according to our priorities and available funds. I usually try to make sure our tax returns goes directly into the house, be it remodeling, paying extra towards the mortgage, or just saving for the future or emergencies.

Our other checking account is for general monthly expenses. It's tied to a savings account just to wave fees. I also "hide" 1k in this checking account. When we had no money, this was my emergency fund that got used all the time. Prior to hubby, it was only 100, and as our income increased, I increased the amount. In my ideal world, a whole months worth of expenses would be in there, I love this cushion for "high spending months, " like December!

In any case, get yourself set up with mint.com, go get a basic financial planning book, and then sit down and write up a 5 year financial plan. YOu will be so glad you did.



answers from Charleston on

We do a combination of cash envelopes and credit card (we use it for the points, and pay it off in full each month). We use an excell spread sheet and list out all the catigories, then our budgeted amount for each. Then each week we enter our actual costs. We save ALL receipts. We use the cash envelopes for our "fun" money or personal spending money, kids clothing fund, school supplies, and our personal clothing funds. Everything else goes through the card, and gets logged. My husband usually enters all the numbers each week, then we have our "budget meeting" This now takes less than 5 minutes a week because we have a pretty good handle on things. We look at how we are doing, discuss how to handle any unexpected expence, and at our last meeting of the month we make a new page for the next month and adjust the numbers as needed (this is why we chose to use excel - we can copy and paste from month to month). Our las meeting is of the month is our "long" meeting because we have to discuss the next month. It takes about 10 minutes.

At first, our meetings took longer and we forgot catigories initially. We also have a spread sheet for our savings, so we can see all the different things we are saving for, and where we are on each savings goal. We have slowly built a system that works for us.

We are also big Dave Ramsey fans, and he says that it takes 3 months to get a budget system going and iron out all the kinks. This made a huge difference for me because we used to try to budget and it would go horribly and after a month we quit. After hearing Dave say that, we decided to try again and both engage the process for a full 3 months before we gave up. It took about 2 months for the process to even out, and after 4 months we stopped finding catigories that we had left out.

It is worthwhile - this has improved our relationship a ton!!! Good luck!!!



answers from St. Louis on

I am newly married and never really had to do a budget before so my husband and I BOTH found out the hard way what can happen if you do not use a budget. It took us several months to dig ourselves out of the whole we created. We tried the envelope system but like a lot of people if you have it you you spend it. Right now are finances are very tight because we had to buy two vehicles 3 months apart (and by had to I mean HAD TO they stopped working). My husband is friends with a financial adviser who sat down with us and talked about our finances and how to cut "the fat" as well on how to track our spending with a "visual" of our spending.

Here is how we do it:

1.) Gather all your bills together - you have to know how much money is going out.
2.) Figure out how often you fill your gas tank and approximately how much you use per month - is it all on going to work/picking up kids/grocery shopping or is it recreational use?
3.) Next you are going to want to figure out how much you bring into the home - your income.
4.) This is the HARD part making a budget - sit down with your husband and write out how much you spend on bills (food, gas/electric, daycare, household, gas, student loans) anything you spend money on you can even include a miscellaneous category as well as a savings category. Budget all the way down but remember to budget for that "rainy day".
4.) This step is what saved us - he advised us to go to www.mint.com and sign up. This step has helped us from "OVER" spending. If you have a smartphone you can also download the mint app to your phone and track it while you go.
HOW IT WORKS: and some people maybe be scared of this but you put in your bank account information, then set up which categories you have decided on (food, gas, electric, etc) and follow the directions. What this does is track all of your spending if you use a check or credit/debit card. If you use a card and its a major company it will automatically do it for your in real time. Checks you mainly update it and this can also be done on your phone. KEEPING YOUR RECEIPTS as well will help you with this app.

When I go shopping or go to use any money of any kind I always pull up this app on my phone to know just how much I can spend. It will tell you how much is in your acct (not including what is not been cashed yet) as well as showing pending charges. It will let you know when you are close to your or have gone over your budget. at the end of the month it will send you a summary to your phone as well as let you know of any tips on how to save in the future for certain categories. The only thing it does not track is "Cash" purchases. This works in our favor because we give ourselves 100.00 a month each to spend however we wish (movies, shopping etc.) We take out 50.00 a paycheck and deposit the rest. This helps to NOT blow our budget this is our movie and once its gone you have to wait until the next paycheck.

I do not know if this helps you but it has saved us a lot of overdraft fees and helped us realized where all of our movie goes. Because of this app we have cut a lot of fat plus have taken that movie and put it into our savings for when those "rainy days" pop us.



answers from Atlanta on

We use Mint.com. It's free. We also use Amex to get the points. With mint we get weekly updates o. Where and how we spend our money. It makes it so much easier to budget.



answers from Miami on

The problem with putting cash in the envelope system is that when it's gone, it's gone. That in itself is a problem. What happens when unforeseen circumstances come up and you need the cash for an emergency, for example? My husband and I use our credit cards for emergency situations. We exclusively use our check card instead of carrying cash or needing to write a check. Since I handle the bills/finances in the family, I know when certain things are coming up (car insurance) and I plan for it accordingly. Every pay day, my husband puts $50 in the savings account. May not seem like much, but we are a family of 6 on one income. When I am planning a big purchase, for example, I want a dishwasher in the near future, I will begin taking out a certain amount of money every pay period and put it in an envelope. I do this because if my husband sees that we have paid all our bills and there is "extra" money to spend, he will find reasons to spend it. This is how I saved enough money to buy two twin beds for my daughters. We didn't have the money to spend up front, and I did NOT want to put it on credit so over a period of several months I began taking out $25-50 every pay day and putting it in an envelope. This is the only envelope method that works for me because I am putting that money aside to be spent for something else much later.


answers from San Francisco on

My husband and I sound similar to you - no debt, comfortable income, and we like the finer things in life. :)

The only way I have found to resolve this is to pay ourselves first. I put 10% into savings, and the rest into checking. Obviously the bills get paid first, and the rest is fun money. I understand the allure of points on the credit card, but as you pointed out, it's very easy to charge it, and then wonder how you managed to spend so much by the end of the month! What I've done is decided to spend only the money we have in checking. If we can't afford it, then I don't buy it. I use my debit card for all purchases.

For places where they offer such things, check into a store debit card. For instance, Nordstrom and Target offer them (and probably a lot of other places, too) - when I go to Nordstrom, I use my Nordstrom debit card. I still accrue all of the points like I would with their credit card, BUT it comes directly out of my checking account, right then and there. At Target, you get a percentage off of every purchase (5%, I think), but the money comes out of your checking account. So you do still get some of the benefits, but there's no "credit hangover" at the end of the month. :)

Also, where some people have their checking and savings accounts linked for overdraft protection, I don't. Either I have the money, or I don't, and having no overdraft protection forces me to pay attention to my checking account on a weekly basis. Your bank probably has a mobile app that will make this easy to manage.



answers from Seattle on

We had several different debit accounts:

- His
- Mine
- Bills
- School
- Medical
- Deposit

And several different savings accounts

- His
- Mine
- Long Term

Here's how it worked:

ALL money got deposited into the deposit account. His/ mine/ taxes/ windfalls/ gifts/ etc.

From there we moved it electronically into the other accounts.

- Each got the same amt of personal money ($100 per paycheck). This covered ALL personal expenses. Haircuts to gym memberships to girls nights out.

- Homeschool $ was put into the school account.

- Medical was left with 0 in it until needed. Then, it was pulled from savings.

* The education & medical expenses made tax time a million times easier.

- All the money for bills was moved into the bills account (including grocery money).

- The rest was put into the OSF (oh shoot fund... To cover the stuff that just comes up every month: new breaks, unexpected visitors, broken this/that/whatever).

At the end of the month ALL of the leftover OSF went into long term savings.


answers from Washington DC on

My sister used the envelopes and it worked for her! I don't know if I could stick to that, but it really worked for her to get out of debt.

My husband and I don't spend on credit cards (since he maxed one out after I told him not to use it...story for another day!). We do, however, have some debt that we are working to pay off. We also do too many fun things (i.e. leaving a week from tomorrow for an awesome cruise!). But, fun things are necessary in life. We don't use cash...because it's easier to spend. so by using the debit card for everything, we can control better how we spend every penny.

Good luck!



answers from Fort Myers on

I tried the envelope system. It worked for me, not my husband. He is the type that if he found $20, he would want to spend $50. So, I had to take desperate messures. First, I took away his debit card. Debit card meant free money. Then he put his credit cards in the lock box. Credit cards meant free money. I couldn't save anything. He complained that he never had any money, so I told him to do the finances. He couldn't do it. So, we sat down & had a talk. We each had a small amount of walk around money on us, but the bills came first. I bought a notebook & wrote down all the "fixed" expenses. Then I listed all credit card charges. I kept ALL the receipts in a big container, even McD's. I made columns in my notebook for gas, medical, cash wd, eating out, etc. I even took the grocery receipts & seperated beer, wine, any meds like vitamins or scrips & junk food on my break down. After doing all this, I realized that I was spending too much at the $ store, & my husband was spending too much on junk food. We also realized that we were eating out alot more than we had thought. The first few months were hard, but it has gotten alot easier & it really helped since he had to quit working after his brain surgery & stroke. oh, by the way, I also am keeping track of how much I save watching for sales & using coupons. And, we finally have a saving account ! YEAH !!



answers from Oklahoma City on

We did tracking for several months to track where we were spending our money. We wrote down every purchase even if it was a piece of bubble gum in a gumball machine.

This helped us see exactly where we were spending the smaller amounts that can add up. Once we did that we were able to see where every penny was going. We didn't really find anything mind blowing. Some other friends that were doing this too found they were spending hundreds of dollars on coffee at the local shop every month. That's crazy to me, I do like my Dr. Pepper but it's only a couple of bucks per day.

When we sat down and wrote it all out on a graph we were able to see what we were doing and decide where we wanted to cut with our own spending.

I would not be willing to cut my Dr. Pepper out. That is something I should be able to spend my own money on. So when "I" get my spending money I can do with it what "I" want. I do not have to be accountable in any way with it.

Right before hubby and I got married he started paying off his bills using some sort of method where he paid off the lowest one that month. Then he used the extra money the next month to pay off the current lowest bill. So each month he has one less debt payment to make and each month one debt was paid off. He had gotten up to the point where he was paying off entire credit cards.

Then we met and got married, bought a house, got me a newer vehicle, you know, life intervened. His debt was so much lower though. We only had one credit card and I had a Montgomery Ward's card so we could do what ever we needed if an emergency came up.

Eventually we went through a community credit counseling program and that's where we learned about tracking our spending. It really opened our eyes. Once we figured out what was important to each of us we were able to decide where our money was going.

We put money in savings each month through his employer who matched a certain amount. He was able to pay off a couple of other small bills but he got laid off his high paying job and didn't ever have one that even paid half that salary.

So life changed for us again and we lost everything. Now we live paycheck to paycheck often doing without all sorts of things we really need, like medical care. I have no insurance, hubby is on medicare, kids are on state medical cards. So saving money for emergency's is important but not at the cost of your monthly spending for needed or really wanted things. You should not feel like you are giving up too much.

I hope you guys can come to terms that are satisfactory to both of you. Often one will say they are comfortable cutting things out but they really aren't. Then resentment and anger take over after a while. So please have compassion for each other and make sure that the other one is not giving up something they really enjoy to do something else they may not really like or want at all.

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