I’ve tried many different budgeting techniques over the years. I’ve used online programs, a number of manual systems using paper and pen, and some combinations of both. The envelope system is what works best for me.
Basically, there are 2 parts. The first part is the actual budget. I take a look at all of my monthly expenses – the minimum amounts that I can pay towards my bills, add them together, and make sure they are less than my month income. This is the hardest part since this is where I had to take a good look at how I was spending my money and how long it would take me to get out of debt by paying only the minimums on my credit cards. This is where you get real with yourself and agree to either change or habits or agree that your financial status will always be messy.
The second part breaks down my bills into separate budgeting categories. For example, rent, car payment, credit card bills, student loan payment, utilities, cell phone, etc. are all budgeting categories. I even have categories for gifts and miscellaneous. What I don’t have a category for is savings :(. Some of the bill payments I make I schedule from the creditors’ websites, others I schedule using online bill payment, a few I use cash for.
Since my paycheck is direct deposited into my checking account, I have some of my bill payments auto debited right out of my account by either providing the creditor with my routing and account number, providing the creditor with my debit card number, or by using online bill pay in which my bank is the initiator of the transaction instead of the creditor. All 3 methods work well for me, although I tend to use my debit card as a credit card so I can get a few reward bonuses deposited to my account each month. Most banks, like www.aurorabankfsb.com, will allow all 3 options I’ve described above. I hardly ever write checks, except to the school or church.
For categories where I can use cash instead of credit like gas for my car, groceries, clothing, school supplies (including school lunches if I choose to go that route), etc, I literally go to the ATM every payment (or shortly after) and withdraw cash. I have actual envelopes which are labeled and I sort the cash into the envelopes. When the money in the envelope is gone, I can’t spend on that category anymore, until it is replenished again.
Basically, my paycheck is direct deposited into my checking account, some of my bill payments are automatically withdrawn from my checking account, and then I do have a few categories in which I withdraw cash from my checking account in order to keep track of those expenses. Overall, I do more transactions through my checking account than by using cash.
What do you prefer using? Your debit card or cash?
Disclosure: Brought to you by your friends at www.aurorabankfsb.com.