For those of you who are new to budgeting, I wanted to make a thread out of my response to corasmom's question about starting a budget.
Here's what we do. We have what we call our "Bill Pay Chart" on our bulletin board next to the computer (where we pay all of our bills online). I have uploaded it to our website.
for a Word document containing our current Bill Pay Chart. It used to be more square than rectangular because we had so many credit card bills. Now we're
down to one and our utilities.
The black line in the middle separates the bills due in the first half of the month from the bills due in the second half. DH
gets paid on the 15th and last day of each month and his check is directly deposited into our checking account.
On the 15th and last day of the month, I pay the bills due for that half of the month (the first half paid out of the last day check and the second half paid on the 15th). That leaves me with our "available cash."
From our "available cash," I write out on paper our 5 consistent envelope needs as follows:
Diapers--$45 (every other time)
Gas--$75 (sometimes more, sometimes less, depending on our travel needs)
Misc (also known as Blow Money)--$20
We come to our Budget Meeting in the evening after the girls are in bed. We take the list with the envelopes written out and add any additional "Pork Barrels" that we need. These are items that we'll need to buy during that two-week period. We make envelopes for those. These can be anything from greens fees for the golf league, portraits, oil for the car, bras (I needed new bras this month
), special occasions, etc.
We determine how much we need for those enevelopes and add up the total. We write one check for CASH and I take it to the bank the next morning and cash it, then divvy up the cash to the vairous envelopes.
Whatever is left over goes DIRECTLY to debt. Now, as far as the credit cards go, we're
following Dave Ramsey's Baby Steps. The first step is to get a $1,000 emergency fund. In the event that something happens (car breaks down, furnace blows, etc.), you'll have available cash so that you DON'T have to use credit to survive.
The second step is called the Debt Snowball. Here's what it says about Baby Step 2: Pay off your credit cards, smallest to largest by "Snowballing" the payments.
Write down all your debts except your home. Arrange them in order from smallest balance to largest. Do everything you can to pay off the smallest debt listed (take on a second job, or sell stuff if
you have to!) while making minimum payments on everything else. Once that first debt is paid and gone, then "snowball" that monthly payment money over and apply it to the next-smallest debt (in addition to that debt's normal payment). When that one is paid off, then take that monthly payment amount and start applying it toward your next debt. Get the picture? The more debts you clear off, the more your "snowballed" payments are increasing, and the more headway you'll make — faster — on your larger balances.
Ramsey writes: "The reason we list the debts from smallest balance to largest is to have some quick wins. This is where behavior modification is more important than math."
One important caveat: If
working on this second Baby Step and some emergency arises which forces you to spend any part of your emergency fund, immediately stop this step and return to Baby Step #1 until you've refunded your emergency fund in full.
This website gives a clear view of one person's experience working the Debt Snowball:
With the extra mileage income, I wouldn't even count that in the "income part." I'd qualify it as "extra income" and put it straight toward debt. If
you need it to eat, then use it for that, but if
not, I'd put it directly toward your Emergency Fund or Debt Snowball.
And you should call your gas/electric companies about level billing. We usually estimate how much we'll need if
the bill hasn't come yet. We typically know about how much it will be (within $20) so we estimate if
we have to. The other option is to see if
they'll send you an online bill. Those arrive sooner than the paper bills.
I know this is A LOT of information. PM me if
you have questions or I can help in any other way.