We’ve covered no more borrowing money and an Emergency Fund. What’s next, you ask?
Write Down Your Budget. Every.Single.Month.
Get ready. This is where I take the ickiness out of the word “budget”.
There are 4 places your money should go while you are getting out of debt.
- Envelope System
- Sinking Funds
… in that order.
We use a template I found on Google Docs (I like this one if you get paid once a month, this one if you get paid twice a month, or this bare-bones template based on Dave Ramsey’s Allocated Spending Plan easily adaptable for weekly, bi-weekly, or monthly income!)
An Allocated Spending Plan is what brought me the biggest sense of peace during our financial journey. I knew, without a doubt, that I’d have money to get my hair cut, because I saw all of our money being spent on paper before we ever hit “send” or stuck the stamp. I knew, when I went to pull out money for my Envelopes, that nothing would bounce as a result.
The gist of an Allocated Spending plan is to write down your income every month, and “spend” it as you go down your prioritized list. When you “spend” it, you subtract the exact amount from your income. Here’s an example for you visual learners:
Mortgage/Rent: $500 / $1,500
Utilities: $100 / $1,400
Groceries: $200/ $1,200
Gas: $100/ $1,100
(as I said, use EXACT numbers. Don’t round things unless you are just projecting them for the next pay period.)
Now, those are your basic needs. A place to live, lights and heat, food on the table, and a way to get to and from your income source. If you were, as Dave says, “Gazelle Intense”, you’d have $1,100 to send to your debt!
But we weren’t *that* intense…
Come back tomorrow to read more about budgeting! You know you want to….
In the meantime, check out my other Financial Wellness Tips!