Establish a Budget: What to Put in Those Envelopes {create an envelope baseline}

Last time I posted about budgeting was at the beginning of the year when I shared some free printables that I use for my budgeting. We had added the envelope system to our budgeting system about 6 months prior to that post and i have to say, it has helped up tremendously. Especially with the talk of the capsule wardrobe and the effects that has on a budget, it is something that I thought I should touch on.

I've had a couple conversations with people about this, I thought I would share this with you. And, one of my resolutions, or new years goals, was to pay off debt. The envelope system is nearly critical in the success of becoming debt free...

We are still paying off debt like no other. But not quite with "gazelle speed" as Dave Ramsey calls it.

I talk about budgeting with people all the time. Not that it rules our life, but really that it sets the guidelines and parameters of what we are willing to do, for now. But living on one income (and not a grand one at that) we can't do it all, all the time, at the moment.

Don't get me wrong. We still do stuff. We have memberships to things. I still go out to dinner with friends for book club and other things. But I have made the decision that I do not need to order anything. I am there to visit with friends. I haven't gotten kicked out of a restaurant yet for not ordering food. Did it feel weird at first? Definitely! Does it still feel weird? Totally! I rent things from the library instead of buying from the store or getting netflix and hulu.

You know what, it works! We no longer over spend, even with the fabric purchases that I may not have made after starting my capsule wardrobe. Those evil credit cards don't get used.

But one thing I get asked whenever I get to talking about budgeting, or just what I hear, is I just don't know how much to put in one/each envelope! Don't use it as an excuse not to get started. Especially if you have a goal to becoming debt free!

This is what I suggest... Build a Baseline.

1. Establish a Budget. Just like everyone else says to do, this kinda needs to get done first. You need the roof over your head and the electricity/gas to cook your food. This part doesn't mean necessarily what amount to put in what envelope. It simply means to designate the different bills and things that need to get paid. The envelope amounts can come later. It doesn't all have to be done all at once. just as long as you know how much you have after all the bills are paid is the foundation needed to begin the rest. Establish this. use it for a month, or two or three to get the feel of it.

check out these helpful places for building a budget.

• Our Free Printables
• use Every Dollar from Dave Ramsey. it's a free online system that lines up with his steps. It totally puts things into perspective with meters to monitor the steps. It's a great visual! There is a subscription option too, but I haven't tried that one.
• Dave Ramsey's website has all kinds of resources check out a couple (because there is a bit) of envelope posts here and here
• A Bowl Full of Lemons has a budgeting series with some excellent printable bundles you can purchase and a step by step process how to use them and/or make your own
• One Good Thing by Jillee has a tutorial for making your own envelopes
• Check out this post on Financial Freedom about envelope systems
• Debt Steps has one too

I used a budget for about a year before I started using the envelope system. It might set me behind a bunch of other people. But at least it's done now.

2. Collect your receipts to track your spending for the month. You can go between pay periods or for the entire month. I do pay periods. The husband when from every week to every other week when we started the envelope system and it helped us not run out of money in the middle of each pay period. You know, so we could buy food!

This includes credit card receipts! But, the goal is to not use those credit cards! Keep tabs on your account, or just withdrawl cash and use that so you can physically touch and actually see how much you have left. But if you so happen to use a credit card, keep that receipt too.

This is why I suggest to use your budget to help you know how much you have after bills, but also to track your normal spending habits. It's easier to categorize when you have your typical purchases in front of you.

3. I just organized by receipt. you could probably track items using excel, quicken might have some options. I just used pen, paper, and receipt.

• separate them by pay period or month.
• Organize your purchases by category that makes sense to you. The common ones I have Household supplies, Personal Care, Baby supplies, care maintenance, animal supplies, date night/entertainment (and after the fabric purchase fiasco when I was building my capsule wardrobe, fabric and sewing). If you sort your receipt by pay period/month you can see the amounts that you typically spend and can use this as a stepping stone for your envelopes.
• Tally the amount you spent in each of these categories
• compare these numbers to the remaining amount in your budget. did you overspend your remaining amount

Check out these tips, pros and cons on Money Crashers

4. Add these categories to your budget and the amounts that are established. If you establish a baseline, it helps. You can do this over the course of 1-2 months and average out the spending.

Once you have that baseline established and those amounts written into your budget, take the time to reflect on your spending after each paycheck, each month. It's not written in stone and you can update and change.

I also add envelopes to account for birthdays as they draw near, anniversaries and even holidays, also known as like a sinking fund. I know it's not a saving tool, but it is working for us for now and it prepares us for those things.! But I am sure it will change as our needs change!

Don't be scared to start! Anyone can do it! You can do it too!

Establish a Budget: Free Budget Printable

One of my New Year's Resolutions, you can read about them here, was to start continue working on getting out of debt. 

I've been working on the budget, more making it habit, for the last year and a half. It hasn't really gotten really nitty-gritty until these last several months where I really buckled down and started following the zero-balanced budget as suggested by Dave Ramsey. I really suggest that you read his book Total Money Makeover; and, if you have kids, read Smart Money Smart Kids which he co-authored with his daughter. Really great reads. I borrow them from the library every now and then to refresh my brain and discover something I missed. They also have sheets that you can copy and use for your own budgeting in the back of the book.

I will say, before my introduction to Dave Ramsey, I had no idea how to build a budget and (key) make it work. I had ideas and kind of categorized what I already spend, but had major difficulty going that next step into using that to plan out how I was going to spend my money. Since starting the envelope system I literally carry standard paper envelopes in my purse when I leave the house and only for the intent for something specific. But, it took a while to figure out how to document my plan

So I came with these printable pdf sheets to use for my Budget Binder. They are not very pretty but solely focus on function. Beside, the kids usually color all over them anyway.. :)

The Budget Binder Printable pdf sheets has 12 printable pages with fill in blanks for writing down info. I have columns that divide the months down by weekly and bi-monthly. You can pick. 

Included and brief:

1. Record of Accounts - a place to write account log in info. For those times you forget your password.

2. Income Tracker - this works best for weekly or bi-monthly incomes. I write down net and gross

3. Debt Tracker - Write down your debt balance after each month statement. Watch your balance drop

4. annual expenses - for those expenses that are easy to loose track of. Break down by month, or by paycheck to see how much to stash away to cover those yearly doozies

5. Annual expense account - have you bought a home and had an escrow account? This is what I use for a savings account solely devoted to paying those annual bills. I keep track of how much goes in each month and when bills are due to make sure I am on track. I basically treat it like an escrow account. write down the total amount the month it is due and go from there with the monthly amount to set aside.

6. Monthly Due Dates schedule. I don't use this anymore, but it's great for starting so you can see what bills are due when

7 Monthly Expenses Worksheet - Write down the total amount of the bill due, divide it amongst the regular number of pay days and deduct that from your pay. When the bill is due, you have the money to pay the bill.

8. Monthly Expenses Envelope. I write down the envelopes that I have, use the number of money left over after bills are paid and disperse into the envelopes until all money is in a category

I am sharing these budget printables with you for free to share the knowledge and basis to begin living within your means and Establish a Budget. 

What do you do. Do you have a strict budget? Or just enough to get by? Or are you like how I was a few years ago and new where the money was going but need that extra step to make a plan for where it will go in the future? Do you use a certain printable, or create your own?