In our house, a monthly budget is a necessity. I have always had the desire to be a SAHM, and before Mr. Lion and I got married we knew we had to start planning. I graduated from college with some loans and credit card debt, and we knew that it had to go. Fortunately Mr. Lion introduced me to Dave Ramsey, and we have been following his budgeting strategies since before we got married. Within our first year of marriage we were able to pay off all of our debt, except our house, and we were then able to spend the second year of our marriage indulging in the freedom that having no debt provides. Although we have always had a written monthly budget, now that we are down to one income and things are a little tighter it is exceptionally important.

Without an easy to follow system, budgeting can seem complicated, difficult, or restrictive. We have found a strategy, however, that makes me feel more free than I ever did when I didn’t have a plan. It is not complicated or sophisticated, but it works for us! Hang in there with me, as this post is a bit lengthy even though our system is simple!

 1. There is no “Mine vs. Yours”

We sit down together to do our budget each month, even if the numbers stay the same from the previous month. We make any money decisions together.

2. Our money is spent before the month begins

We operate on a zero based budget. This means that income = expenses, and our checking account is at $0 at the end of the month. We started off using Dave Ramsey’s budget forms, and from there have created a Google doc like this one.

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This Google doc is not exactly the same ours…we have far fewer line items that we include each month, mostly because many of them do not apply to us. Once we were comfortable with the amounts we were putting into all of the specific categories, we decided to simplify our budget by combining ones that go together. For example, our Entertainment category includes all money set aside for movies, eating out, babysitters for date nights, and any other “fun”  stuff we may want to do. Our Household category includes all cleaning products, toiletries, pet items, baby items, books, etc. We still plan for all of the specific expenses, but having fewer categories makes doing the budget much simpler.

We start with our income, then we decide what we will give, what we need to save, and then we decide where to spend the rest. We move any money we plan to save into a separate account, schedule our bills through bill pay, and then withdraw our cash (more about that below). Once the bills are paid, there is nothing left. We have two columns per month because we are paid twice per month. This allows us to break down our monthly income and decide what bills will be paid out of each paycheck. Each line item lands in one of the two columns. The expenses for the column should equal the income (I love Google docs or Excel for this, because you can simply highlight all the numbers and it will add it up for you at the bottom! I am not savvy enough to use formulas, so this is my more simple solution.) We schedule almost all of our expenses when we do the monthly budget at the beginning of the month, with the exception of the bills that change monthly (such as our electric bill). For the bills that are not always the same, we budget based on what we predict it will be (we always assume high rather than low), and then schedule the bill as soon as we have the specific amount for that month.

3. We use cash

We do not use credit cards, loans, or debt (with the exception of our mortgage). Period. We learned that, statistically speaking, people who use credit spend more. We drive paid for cars, and we don’t care about rewards or trying to earn cash back. Credit card companies are brilliant at marketing, and we choose to eliminate the temptation to spend more than we have. When you spend cash, your brain actually registers pain (it does not do this with credit or debit cards), causing you to stop and think before you part with that $20 bill. We use our checking account to pay bills and purchase gas (only because I hate having to get LL out of the car just to pay cash inside the gas station), and we use cash for almost everything else.

We make this work by using a modified version of Dave Ramsey’s envelope system. In our budget, we designate how much money we need to spend each month. Each spending category has a corresponding envelope. I use a coupon file that I got at Target for $1 as my organization system, but you could use actual envelopes or a more expensive system if you wanted to. Because I do most of the shopping, I keep the coupon file with me at all times. That way I can always take money from the correct envelope. When the money is gone, we stop spending. This is definitely the most difficult part of our plan. We are not perfect at this, and sometimes we do decide to splurge on something by taking from savings, but the accountability of having to use cash really makes us think hard about what we decide to spend our precious dollars on.

4. We plan ahead and save

We have one checking account that we use to pay bills, and another that we use as a savings account. There are some things that Dave includes in his budget form that we don’t pay for every month, like home repairs, car repairs, insurance, Christmas gifts, etc. but we need to plan ahead for these items. When we first started our budget we made a list of all of the things that we knew that eventually we would need to pay for, and we figured out about how much we would need to spend per year. We then divided that number by 12 months, and that is the amount that we save each month. The money is moved into the savings account as an expense each month. This is the second line item in our budget, after giving.

To keep track of where that money is designated, we have a separate tab in our google doc that itemizes every dollar in the savings account (you can see an example on the savings tab). When we need to spend from this account, we simply deduct the amount from the account, then balance the amount on the designated line item within the spreadsheet. I check monthly when we do our budget to make sure that this spreadsheet is balanced and matches the amount in our savings account.

We also have an emergency fund that is equal to 6 months of our expenses. We keep this money in a money market account and do. not. touch. it. If we ever have a job loss or another emergency, it is there and easily accessible. We do not consider this money an investment, but instead look at it as insurance, so we are not concerned with trying to earn interest on this account.

5. We still buy the things we want

Because we have no debt and we live within our budget, there is a little extra “wiggle room” in our budget every month. After we have designated funds to giving, saving, bills, and other expenses, we still have a little left over. Because we believe in a zero based budget, we have to decide what to do with the extra. The third tab in our Google doc is a list of things we want to purchase, prioritized in order of which we want to purchase next. With any extra money we have at the end of the month, we save it toward the next item on the list. For example, this month I decided I really wanted to purchase an Ergo carrier, so we put it on the wants list. Since this was something I wanted more than, say, paint for the living room, we decided to put it at the top of the list, ahead of other items that were already there. Next month, we will take whatever extra we have and put it toward the carrier. When there is enough saved we will order it. We keep this money in our savings account, under the line item “Wants.” Sometimes this money goes toward vacations instead of tangible items. Having a plan really eliminates impulse spending, and helps us to meet our goals responsibly without feeling deprived or restricted.

6. Pocket Money

Sometimes things come up throughout the week that require us to spend money we may not have considered. We designate “Pocket Money” for each of us each week. This is a small amount of money (we decided on $20 each per week, but this could easily be less), so if Mr. Lion decides to stop and get McDonalds for breakfast on the way to work, or I meet a friend for coffee, this is where that money comes from.

 7. Emergency Budget Meetings

Life happens. Sometimes, in the middle of the month our budget needs to change. That is okay, but it requires us to sit down and agree on the changes together. Dave Ramsey calls these Emergency Budget Meetings. The purpose of the budget is to have a plan for your money so you can “tell it where to go instead of wondering where it went.” There is no perfect system, and it is okay to make changes (especially in the beginning). We need very few of these meetings now, but in the first 6 months we had them all the time.

How to use the forms

Dave Ramsey has all of his budget forms available for free on his website. If this method is new to you or you are interested in a more detailed explanation, I would highly recommend his books or the Financial Peace University class. They have helped us so much!

If you would like to use the Google doc I have created, you will need to have your own Google account. Go to the doc, and under File, select Make A Copy. This will copy the doc into your Google Drive, and you will be able to edit the new copy. I have added line items for all of the items in the Dave Ramsey form, with some of them being on the Monthly Expenses tab and some on the Savings tab. Make this form your own…you can delete or add rows as necessary.

One additional feature of the Google doc is color coding. All of the cells start white. I then highlight them in yellow once they have been scheduled. Once the bill is paid and the amount is deducted from our account, I highlight the cell green. This way I can very quickly balance our checking account…the yellow and white cells should add up to equal the account balance. To change the color of the cells, highlight the cell, then in the toolbar select “fill color” (it looks like a bucket of paint) and choose a color.

If you have questions please let me know in the comments and if I can I am happy to help!

How do you make budgeting work for your family?