Frugal Friday

I completely forgot about Frugal Friday last week, so here's it is!

Budgeting:

Once I graduated college, my dad taught me his budgeting system and I have kept to it since then and plan to the rest of my life.  It works great!

It's similar to Dave Ramsey's Envelope System except that I don't stash actual cash in envelopes somewhere, I use a binder and notebook paper to keep track of all my money and I leave the actual money in the bank (this just seems safer to me than having lots of cash around the house).

Here's the basic system:

I get paid twice a month, so I split each monthly bill I get in half.  Half of each bill comes out of every paycheck I get.  I also guesstimate how much I will spend on items that are not "bills" but still must be paid for every month and take out half of those amounts from each paycheck as well.  I like this system because I always have money in my account for everything that I have to pay for.

Let me give you an example:

Say "John Doe's" paycheck is $800 and he gets paid twice a month making it $1600/month.  His Apartment Rent is $650/month, Utilities are $150/month, Cell Phone is $50/month, Food/Toiletries are $150/month, Gas for Driving is $100/month, he'd like $100 of Fun Money/month and he'd like to save $100/month.

John Doe would write out on a different piece of paper each category (ie, rent, utilities, etc...), then each time he got paid, he would add half of the total monthly bill amount to each category and subtract it from his running total:

         +$800      Paycheck
         -$325       Rent (half)
         - $75        Utilities (half)
         - $25        Cell Phone (half)
         - $75        Food/Toiletries (half)
         - $50        Gas (half)
         - $50        Fun Money (half)
         - $50        Savings (half)
___________________________
          $150      Left Over

You can see how all of John Doe's bills/incidentals are covered each month and yet he still has plenty ($150/paycheck or $300/month) left to decide what to do with.  Of course this is just an example, I know that there are plenty more bills that people have to pay, but it shows you how you can budget and yet still have extra left over each month to use for more savings, fun or to bless someone else. 

I actually budget every single bit of my money every month (until I have allocated my entire paycheck somewhere) so I do not have any surprises later (and any extra I have goes into savings).  I budget for things that might come up such as Doctor Visits, Car Troubles, Birthday and Wedding Presents, Vacations and Scrapbooking.....that way when something comes up like my car breaking down, I already have a fund set up so I don't go in the hole trying to pay for it.....or for that trip to Hobby Lobby when I didn't realize Scrapbooking items were half off!

Also, another reason I budget all my money to a category is because once that category is empty for that pay period (such as the Food/Toiletries category and the Fun Money category), I'm done spending out of that category and I have to make due until the next paycheck.  It's one way to keep myself accountable and not overspend.  But the good news is that I don't have to wait an entire month for more money (since I add to my budget twice a month), I just have to wait for my next paycheck.

Hopefully this was helpful to someone out there, I know it has been a great thing for me to do.  If the system wasn't entirely clear, feel free to leave me a comment and I'll explain further.

Once last tip: make sure you sit down every few days with your receipts and paid bills to subtract them from your budget so you don't overspend a category.  Also, I like to take out cash for some things like Food/Toiletires and Fun Money so that I can better keep up with how much I've spent and not accidentally overspend because I'm using my debit card.