Easy Savings to Your Budget Using Cash

For most of us, our budgets don't break due to huge expenses every month. We die from 1000 small cuts and potentially give up since it "is just too hard for us", or, "we aren't good with money like Bobby!"

What I saw with our budgeting struggles was exactly that, we would say "oh we've been so good we'll go out to dinner", or, "It is just a sweater, it was on sale, I Saved you money, that what you wanted wasn't it?" so we would be $20 over here, and $10 over here, it just adds up quickly. Also, once you break discipline, you have to get right back in or you will stop trying soon.

One of the things that I was initially dead set against after reading Dave Ramsey, was the wacky envelope system. I thought that since we were bad with cash this would be a ticket to crash, but really that is the secret of the system...you can't crash, you can't go over!

The system works like this:

• Separate bills - Separate the ones you can pay with cash, true cash, not money orders or checks. For us this was the following: Groceries, Gas for our car, Entertainment, Dining, Kids Allowance, and Our Allowance.
• Set budget for each - If you already have a budget, great! Otherwise you need one for every category.
• Break It up - I get paid every two weeks so our plan was to get cash every Saturday after I got paid. So we divided the budget in two. I understand that I get paid 26 times, but our stomach doesn't know that so we looked at a top down budget and a bottom up and determined our bi-weekly needs.
• Separate Envelopes - You need separate envelopes for each amount. On allowance, one envelope per person. Write on the outside of them what they are for and how much is in them when filled.
• Divide up the responsibilities -Get your spouse Involved! Letting someone else have decision ability over a fund is a great way to stop being the budget police! If it is just you, then still judge each envelope as a separate entity and not as a pool of money.
• Plan out your cash - In order to fill those envelopes to the exact amount, and no more, you will need a wide variety of denominations, in our case, all of them! Plan out what bills work for you in each envelope. If you want to eat pizza, and you know Pizza Hut won't take a $50...don't put a fifty in that envelope. On the other hand, you might not want to bring 200 single $1 dollar bills anywhere...trust me...
• Off to the Bank - I will warn you, some of you will feel weird the first time you go in with a note asking for an odd amount of cash and then want it in all of the possible denominations. Don't stress. The banks don't care, and if they did...who cares! It is your money. In fact I have explained the system to a few teller now and one of them is doing the same now as well!
• The Last Envelope - There is one more envelope; label it Overage. You won't need it yet. But at the end of your period, one week, two weeks, etc., whatever is left over goes in to that fund. My suggestion is to do something that the whole family wants to do; pizza, a movie. Celebrate that you beat budget, which is the only way money is left! Spend it guilt free. You will want to put it towards debt, or some other noble cause, but don't you need to as it is truly extra But you do need it, and so do your loved ones, small motivators. If you want Budget to stop being a 4-letter word? Just try it!
• The Aftermath - For us it is important for everyone to know how we ended up for the month at. IF we went over in some other area of our budget we dock the next envelopes, but not the overage. So for us for example, our gas bill was a Ninja this month, as some folk decided that they preferred it warmer then where the thermostat was set, no surprise, higher Natural Gas bill. So for the next few envelopes we will pay it back via lowered Dining and Entertainment. It is a great reminder to all to do there part...and have my kids tattle on each other (kidding).

So what about those easy savings that I spoke about. They come from making budget every time. If you are not using this method, add up over the last 90 days how much you went over in those categories you could pay for in cash? $20, $50, more? Big time budget blowers and money management killers. Using a debit card, or even worse a credit card, and you can nickle and dime yourself to death.

Us? In 12 weeks we haven't gone over once in anyone of the categories, and had, on average $20+ to spend on a couple extras! We are not perfect by a long ways, but we have been able to work together and still have some creature comforts. I know I drive people nuts by saying this, but It is a marathon and not a Sprint. You have to be able to live your plan...forever!

Hope this works for you. If you are doing something similar let me know, would love to hear how it is working for you.

If you like the post, please sign-up for my RSS feed at the top of the site, or via email up there as well.

Managing Money: Get Everyone Involved pt2...

For the second part of Managing Money: Get Everyone Involved, we are going to talk about establishing a work area, cash management and follow-up. Once again this is just how we are doing it, you may find tweaks that work better for you; go for it! We tweaked the Ramsey system for us take any of this you want and turn it into something that fits your personality. It is the only way to make long-term change.

Work Area - I firmly believe that having someplace, a desk, a box, even a bedroom drawer where everything is kept is an important thing. The second, is to make sure that your significant other knows that space as well. This should have files on all bills to store afterward and your checkbook as well as credit cards, if you aren't prepared to chop them up yet. You want your family to understand where all this information is in case of anything happening to you. Banker Girl has a really good article about why here.

Cash Management - For us, this has been key. We use cash for groceries, dining out, entertainment, gas for the car, the kids allowance and ours. This is where we have made most of our improvement in making budget. My wife didn't want to be in charge of an area, but since we are in this together, she took over all cash funds, except the car and allowances. She is 100% in charge of those funds. She has done so well, and I am not just saying that cause she will probably read this :), we have cut nearly 33% off of our grocery bill through better planning, coupons and using only cash.

This has really also squished the Budget Police mentality around here. As I said before it is OUR Families money, our family should have a say! The kids have their votes on how to spend the money as well. They make their pitches on dinner and when we go. So when they used to push to eat out all of the time, now they are often the first to say, "I want pizza this weekend, we better wait!" 180 degree turnaround!

Follow Up - We have a review every weekend after I get paid to review how we did for the previous two weeks. We then go to the bank and get the cash in the denomination we need. I bring one of the kids each time so they see how much money this really is and where their allowance cash comes from. Initially we got some strange looks asking for $x37 in $50's, $20's, $10's, $5's and $1's but now they know us and it goes pretty quick. I may have even convinced some of them to try it as well.

We will also have a quarterly review to check and see if our levels are right: Did we over budget for Gas? (not likely), Under for Groceries? etc.. The most important part is that we discuss it as a family. In learning these lessons now they will hopefully find that personal finance, budgeting and avoiding bad debt gives them a leg-up later in life.

And that is the best thing we can do for them...and ourselves...

Managing Money: Get Everyone Involved pt 1...

OK. It is the day after Christmas, heading to the New Year and new, New Year's Resolutions. Before you break out the Sharpie and commit those to personal growth opportunities it is time to get everyone in the house involved with Managing Money!

For us, when one person has to be the Budget Police it is doubly hard to make it. One person feels the whole burden on themselves and resents the others not participating, and those being dictated to on how/when to spend, resent being treated like a child. I truly believe this is a key reason people fail, it sure has been for us. It isn't just us either, Dave Ramsey devotes a whole chapter to it in his book "Financial Peace."

But I don't think Ramsey goes far enough. I believe that you have to get the whole family involved, down to the smallest ones who have a basic understand of what money is and does. If followed, my hope is to instill "cause and effect"understanding to them regarding finances.

Budget - First off, don't use the word budget, like you do grounded! It cannot be presented as a punishment, but as a way of life! Have a budget that everyone has a part in building. Once all of the "must-haves" portion of the budget is ready gather the family and have everyone apply some group-think to the remainder, if any. For example: Is it more important to the family to dine out or rent/buy DVDs? By asking the question, you get buy in. This is so important when the question comes up, "Why can't we do X?" If you are in a situation where only basic musts are covered by the budget, I believe it is important to make sure everyone, without installing fear, understands the financial situation. Trust me, they know there are issues, and if you don't tell them, they will make up something worse in their heads!

Ramifications - What if we beat our number? We take our "Overflow" out every month and put into a fund for Holiday Fun, extra decoration or other Family Fun. The family earned it, they get to put it to what they want! Want to get your kids to turn off lights/TV, etc.? By doing this we have said $x is what we have for our Electric Bill, if we beat the number it goes into the fund, if over it comes out of our other areas like Dining or Entertainment. The first month they were great and we saved enough to buy some extra Halloween decorations they wanted. This month we were over and dining was cut! Already my 7 and 10 year-olds are running around and chastising anyone that leaves on a light!

Please understand these are just things that are working for us. Personal Finance and Managing money is so much less of a chore when everyone pitches in.

Pt 2 tomorrow...

Dave Ramsey and the Snowball of Doom...

There are a lot of really good ways to begin to get your finances in order. From books, DVDs, website and blog there is really good (and also some Really bad) information out there.

So at the end of September when I looked around for a format that I thought could work for not only me, but my wife and kids as well, I weighed a lot of variables:

• Was is clear and consise? Lower amounts of wiggle room are best for me, because I "justify" my way back into old habits.
• Was there a way to involve everyone in the family? Didn't want to have to be the budget police. I always end up giving in.
• Was there a path post-getting out of Credit Card debt? OK I paid everything, I guess I could charge them up again...

Weighing all of these points and others I personally gravitated to the Dave Ramsey debt snowball.

For me these were the keys:

• The use of cash. Even using Debit cards we were spending too much. With cash when it is gone it is gone...like our Entertainment money right now!
• We could give areas for each of us to be in charge. She runs a lot of the cash envelopes; like for Groceries, Entertainment and Dining. She feels involved, cause she is! Those envelopes are 100% her call. If I want to buy Season One of The Office (which I do) I have to lobby her, just as the kids do for Harry Potter (HP won, damm Wizard!) Having real control over areas keeps people involved without one partner having to be the Budget Police
• Quick Wins. Although it is better financally to pay off debt in order of Interest Rates (as many blogs have pointed out) psycologically it felt nice to pay things off, real tangible change since you no longer have to pay the bill. This really helps me because I can lose focus and become disillusioned pretty quick

So how is it going?

I will give a full update at the end of the month, but so far we have paid off some smaller bills, stayed pretty much on budget (sometimes beating it) and kept everyone in the boat. Due to this our debt snowball is growing and we actually have a bill that we are actually paying more than the minimum on!

While I don't agree with everything Ramsey says, with a quarter of a year nearly under our belts, we are at least taking away from the pile instead of adding to it.

Can't wait to get our snowball to the size of a snowman. I think I will name it Dave...