Living on a Budget:
The Last Piece of the Puzzle

Living on a budget – this is where all of the pieces come together to complete the budgeting puzzle. We will explore in depth the systems for easily tracking your income and expenses each month, controlling your cash and spending, and maximizing your savings account. You will learn how living on a budget can become second nature to you as you make your budget part of your day-to-day life.

You’ve worked hard to put your budget plan together, and refine it and review it until you arrived at a monthly budget that’s not only realistic, but one you feel comfortable you can live with. All that hard work up front will pay off now as you put your plan into action.

Before we begin you will need several tools. I suggest you collect everything now so it will be handy when you’re ready to work with it.

  • To manage your budget you will need a calendar or a date planner – one that is large enough to write in. If you don’t have one available right now you can use my monthly budget planner (which is really just a blank calendar template, but monthly budget planner sounded so much more professional!) Click here for a printable planner and instructions in how to use this critical tool. It will serve as your road map each month to keep you organized and on track toward your goal of living on a budget and becoming debt free.
  • To keep track of the money you’ll be accumulating in your savings account you will need a spiral notebook or something similar. One of the inexpensive 70-page notebooks is perfect. You’ll also need a ruler to get your notebook set up.
  • Your third tool is a box of envelopes. I use the regular size – 3 5/8” x 6 ½”. These are imperative when you start working with your cash expenditures.

Since I’ve mentioned your savings and your cash, this is a perfect time to explain that all of your expenses fall into one of three categories: cash, checking or savings. When you’re living on a budget, there is a specific way to work with the expenses in each of these categories, and this is the real key to the budget system.

In this section I’ll give you just a brief summary of each of the three categories. To work this system you’re going to need much more detail about the significance of each category, which expenses make up each one, and the unique way that each category is handled as part of your budget. When you’re ready to move into the detail, just click on each category name below.

Checking: You will pay your major expenses from your checking account by writing checks or by using online bill paying. Two important rules apply – keep accurate records of all money coming out of your account, and don’t write checks for anything that’s not planned for in your budget.

Savings: This category has two very important functions. First and most obviously, your savings account is where you will keep your monthly savings being put away for emergencies and for your future. Second, this is where you’ll accumulate money month-by-month for your long-term expenses, usually annual or semi-annual payments, so the money is available when the bill comes. You’ll keep track of the money in this account in a notebook so you can record deposits and withdrawals for each “pool” of money being accumulated in your savings.

Cash: This is the cornerstone of the entire plan. You’ll learn to put away the plastic and use cash for your day-to-day expenses – no debit cards or credit cards. Each pay period you’ll withdraw enough cash to cover your budgeted expenses for that period. You’ll divide it up and keep it organized in envelopes marked for each expense. You’ll spend out of the appropriate envelope, and when you’ve spent all the money in a specific envelope, there’s no more money for that expense until the next pay period. For example, if your entertainment envelope is empty, you won’t go to the movies until the next time you fill that envelope. This system will help you learn to think before you spend, and you’ll develop new, healthier financial habits.

As you get in to the details of working with your cash, checking and savings, some of it may seem simplistic to you, or mundane, or even silly. But believe me – how well you learn the system, and how closely you follow it, will determine how successful you are at living on a budget, gaining control over your finances and becoming debt free.

That’s so important I’m going to repeat it: how well you follow this system even when you think it’s silly will determine how successful you are at gaining control over your money instead of letting debt run (ruin?) your life.

You don’t have to master the system before you use it – start putting it in to practice right now, and learn as you go along.

As I said at the very beginning, personal budgeting works, but it isn’t magic. Living on a budget takes discipline (which becomes habit as you practice it) and it can be difficult without a plan – but you have a plan! Keep your eye on your goal. You have all of the tools you need to successfully run your household on a budget and build a solid financial future for you and your family. You can do this!

Monthly Budget Planner
Rethink Your Checking Account
Teach Your Savings to Multi-Task
The Simple Cash Budget

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