Archive for Dave Ramsey

Closing Out The Monthly Budget

It’s Finance Friday and I thought I’d talk about closing out my monthly budget. I usually do it on the last Sunday of each month because I usually have some time on that day (if not, I do it across a few weekdays). I want to share a bit about my process. For the record, I use an Excel spreadsheet so that I can customize everything any way I want.

First, I make sure that all receipts have been entered. I go through my bank statement online and all of my credit cards to make sure I got everything. I try to log them as I get them during the month, but do sometimes miss something–usually something I’ve bought at Amazon (infrequent) and forgot to enter.

Second, I compare my monthly result to previous months and look for areas where I can cut back. I would love perfection, but have to settle for progress. If I could get the medical bills to slow down, that would be really helpful (I need to get a root canal and crown as well as a few other things done).

Third, and this is something that I’ve only recently started doing, is tracking credit card purchases on another spreadsheet within that workbook. I track all credit cards on the same page and enter each individual purchase I’ve made and a general category (eg. gas, household, etc.). That makes it easier for me to see what I want to pay to where. For example, I use my Costco credit card to get gas since it has a 4% rebate on gas. I want to make sure that I pay for the gas I put on there. I had medical bills and some purchases for the goats over the summer and all three of my cards are fairly full. I track each purchase to make sure that I’m paying off new purchases as well as trying to make a dent in the old ones.

I then go through all of my envelopes, put in the monthly allowance for the new month, and make sure that what’s in there is what’s supposed to be in there if I had any left over from last month. Since I’m putting gas on my rebate credit card, it’s usually not too much. If you don’t already know, the envelopes are based on Dave Ramsey’s advice. It is based on the idea that it hurts more to spend cash than to use a credit card, so you’re more likely to spend less if you force yourself to use cash.

It’s kind of involved and takes a while to do at the end of each month, but I feel like I have a much better picture of where I stand when I do all of the steps.

Do you close out your monthly budget at the end of the month? Tell me how in the comments!

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Why You Need To Keep A Household Budget

I have kept a budget for years. That is, I’ve written a budget for years using a simple spreadsheet I budgetmake in Excel. I didn’t have to learn any new software or programs and I can look online by uploading it to onedrive and using the Excel app. I don’t think I’ve ever actually stuck to it, though. Recently, I’ve started a pilot class in our larger area called Bank On Roanoke Valley (check to see if they have one in your area; they had one in Montgomery County, MD before we left there). Writing and sticking to a budget are the cornerstones of the course.

We work hard to earn a living. We should make sure we spend the money we bring home wisely. That’s where a household budget comes in. It’s a good tool to see at a glance what we have coming in, what’s going out (and what that money is paying for), and if there’s anything left at the end of the month to put into savings. Or if it’s hair-on-fire panic, time-to-get-an-extra-job time.

Before we dive into exactly what a budget can do for us, let’s consider for a minute what will happen if we’re not tracking income and expenses. We may end up spending more than we’re making in a given month (or two, or three, or 36). Over time that can put us into some pretty hot water financially. We may also spend a lot more than we’d like to believe on things like eating out, going to the movies, or new clothes.

Having a budget gives us more control over where we want to really spend our hard earned cash. Maybe that’s dinner and a movie, but maybe it isn’t. Wouldn’t it be nice to have an actual choice?


It Tracks Where Your Money Is Going

A budget simply tracks your money. You record where the money comes from each month (your income) and then write out everything you spend it on, starting with your regular monthly bills like mortgage or rent, car payments, utility bills, etc. What’s left after all the bills are paid is your discretionary income. Wouldn’t it be nice to have discretionary income?

Helps You Identify Things You Waste Money On

Having it all in front of you in black and white helps you identify things you’re wasting your money on.

It makes you reconsider if you really want to spend well over $200 a month on Cable TV or $150 on your large cell phone plan. Or how about that yearly magazine subscription to something you no longer read? Go through your expenses and reevaluate if this is REALLY how you want to spend your pay check. For us, that was dining out. Not as a plan, but just while we’re out doing errands or shopping and I either didn’t pack enough food or Kaida decides that she doesn’t want to eat anything that we brought (I know, I could just tell her to go hungry, but usually it’s me not packing enough).

Allows You To Be Proactive About Savings

Saving money without a budget is hard. We go in with the best of intentions at the beginning of the month, but somehow there isn’t anything left at the end of the month. And saving money is crazy-important! Kaida used some of her savings when we had to have Bubba at Virginia Tech for two weeks because I did not have anywhere near enough. Add to that my own plethora of medical bills from this past summer and fall and you find the reason I’m suddenly staring at my budget with new eyes! Remember that part about hair-on-fire panic? Yeah, that was me.

A budget gives you a chance to be a bit more proactive. Set aside some money for savings at the beginning of the month, even if it’s just $20, or $10, or $2. Anything to get started with the habit of saving! Put it in the budget as a regular expense, just like you do with your other urgent bills. If you need to, open a separate savings account so you’re not tempted to spend it.

Ensures You’re Not Spending More Than You’re Making

Most importantly, your budget will keep you on track and help you make sure you’re not spending more than you’re making. And I don’t have to tell you that that’s pretty important for your financial well-being.

How To Get Started

Dave Ramsey is probably the most well-known person with regards to budgeting; I may test-drive his totalmoneymakeoverEveryDollar budget app, but I’ve been pretty happy with my spreadsheet. I recommend his book The Total Money Makeover, the accompanying workbook The Total Money Makeover Workbook, and Dave Ramsey’s Complete Guide to Money: The Handbook of Financial Peace University. The workbook has more numbers/forms and The Total Money Makeover book has more stories; buy whichever one you think would be more helpful for you. He also sells a faux-leather envelope system, but I have not yet upgraded to that (I’m using progressively ratty paper envelopes). I plan to upgrade to them, but I have to plan for it in the budget first! 🙂