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Step 1
Make a list of all the things you want to include in your monthly budget. This includes all of your monthly bills, credit card debt, student loans, entertainment, gas, clothing, and anything else that you might spend money on.
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Step 2
Label a separate envelope for each of these expenses and debts. These envelopes will serve as budgeting tools as well as allowances. Don't forget to create an envelope labeled "Savings." Dave Ramsey always stresses the importance of paying yourself (in the form of putting money into your savings account) every pay period.
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Step 3
With a piece of paper, pencil, and calculator, figure out how much income your household brings in each month. Subtract the amounts that you need for your monthly bills (mortgage, utilities, cars, insurance, credit cards, loan payments, loan consolidation payments, etc.).
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Step 4
Now, figure out how much you can need to budget for necessities that are not bills (gas, groceries).
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Step 5
Figure out what is left, by adding the amounts in step 3 and 4, and subtracting that sum from the amount of money your household earns each month.
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Step 6
With this amount, determine how much you want to put away into a savings account each month. This should be between 25-50% of this leftover amount.
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Step 7
The final amount (the money that is left after all of your necessities have been paid) is what you'll have left over for wants (as opposed to needs).
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Step 8
On each of the envelopes, write the amount that you need to put into it each month. For example, if your monthly mortgage payment is $2000, your envelope should be labeled "Mortgage $2000."
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Step 9
Each pay period, cash your pay check, and put a percentage of each debt or bill into its corresponding envelope, based on how many times you get paid per month. If you get paid twice a month, for instance, you'll put half of each amount into each envelope. Using the above example, if you mortgage is $2000 per month, and you get paid twice a month, you would need to put $1000 in the mortgage envelope each pay period.
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Step 10
Decide how often you want to make the deposits to your savings accounts. You can either deposit it each time you get paid, or do it once a month. Whatever you do, though, make sure that this money does go into a savings account.
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Step 11
For the allowance envelopes (entertainment, clothing, etc.), you can either save up your clothing money until you have enough for that expensive jacket you have your eye on, or blow your clothing allowance on less expensive each week.
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Step 12
As Dave Ramsey says, once your allowance money is gone, it's gone. There is no borrowing from one envelope to another. This will help you get your spending under control, and get your family out of debt.
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Step 13
Take seasons into account. If you want to take a family vacation, decide how long you'll need to save for it, without disturbing your other debts and savings account. Also, determine in January how much you want to save to spend for the holidays at the end of the year.
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Step 14
Read Dave Ramsey's books to get your budget under control, have a total money makeover with your finances, and find financial peace.
Comments
sharaay said
on 9/9/2009 My husband and I tried this earlier this year. We ended up constantly moving money from one envelope to another. I would carry the grocery money, but when if he stopped and picked up some stuff for me, he would use his ATM card or would use money from his lunch envelope. I was constantly putting money back in the bank, or making change to put back in his lunch envelope. Do you have any suggestions to make this work for busy couples?
LilacGirl said
on 7/29/2009 Good idea, this really works if you follow the suggestions and do it.
khanr said
on 2/9/2009 Great article. 5*