Tips for Organizing your Finances

Steve (the hubby) is the brains behind our finances. Trust me, before I met him — my finances were a mess.  Before we got married, Steve got me to use this budget.   WOOT!  My hubs is pretty money savvy — and as a result, we have no credit card debt.  We have our mortgage and my school loans and thankfully, we can breathe easy!  We are blessed.  As many are facing difficult times (financially speaking), we never want to take for granted all that we have.  We are sharing this with you to encourage and inspire you.  So, without further ado, I’ll let my hubby do the talking.

Tips for Organizing Your Finances

Introduction

Let me first start by saying how blessed we are that God has provided for us so generously. At the very least, we try to respect this by being responsible with what He has given us.

This is not a post to help you get out of debt. Maybe the concepts could eventually get to that point, but the purpose of this post is to explain how we organize and manage our expenses within the confines of a budget.

You could probably accomplish the same concept using one bank account and three books (as I’m sure the professional accountants do), but I like doing it this way. I’ve been doing it for over 20 years with small tweaks along the way, so it has stood the test of time – for me at least.

Step 1:  Get a Monthly Budget

The foundation of any sound plan is putting together a budget. For income, we get paid bi-weekly, so at a minimum – and predictably – we get two paychecks a month. That is what we use as our monthly budget income. As for expenses, they obviously have to be equal to or less than the income.

Those who get paid bi-weekly have two months in the year where there is an additional pay period. We do not factor that into our monthly budget. That “extra” paycheck goes toward projects, other expenses outside monthly reoccurring charges as needed, or in a savings account.

Here is the budget sheet we use.
Download a copy in Excel Format (Jan-December)

There are two sheets within the document.  One is January-June, the other is July-December. You can customize this to fit within your expenses and the mathematics are all in place, ready to calculate for you!  **PLEASE NOTE: You’ll need to DOWNLOAD a copy, this one cannot be edited.  Go to File then Download As and once it’s on your computer, you’ll be able to edit.

Step 2:  Get a Month Ahead of Your Expenses

Probably the most challenging thing to accomplish is getting enough money to be at least one month ahead of your expenses so you’ll have some breathing room. Gone will be the “living paycheck to paycheck” anxieties that come when a bill is due before your next check.

The idea behind this is to have your monthly budget income available before the beginning of the month.  The current months income will be used for next month’s budget.

I did this about 25 years ago by taking out a loan equal to my monthly expenses and never looked back; you may already have that set aside in a savings account; or you may have to put aside a small amount every month and get there over time.

Step 3:  Open the Accounts

Our monthly budget process uses three bank accounts, listed below by function. They are:

1. Direct Deposits
2. Monthly Expenses
3. Credit Cards

All paychecks get deposited into the Direct Deposits account which is the holding account for our monthly income for the next month. The Monthly Expenses account is our day to day operating account for the current month. And the Credit Cards is another holding account for credit card charges.

Step 4:  The Cash Flow Process

Here is how the process works. To help explain the process more clearly, we will use the months June, July and August, assume a monthly budget of $1000, and a bi-weekly paycheck of $500.

At the end of June, the beginning balances of your accounts will be as follows:

• Direct Deposits: $1000 (equal to your monthly budget)
• Monthly Expenses: $0.00
• Credit Cards: $0.00

To prepare for July’s expenses, you would transfer your monthly budget amount from the Direct Deposits account to the Monthly Expenses account. This will leave account balances as follows:

• Direct Deposits: $0.00
• Monthly Expenses: $1000
• Credit Cards: $0.00

During the month of July, you paid rent, cable, and phone for a total of $500. You also bought $100 worth of stuff on credit card. Your total outflow from your Monthly Expenses account was $600. Of that amount, $500 was debited and you transferred the $100 credit card charge to the Credit Cards account. Doing this transfer reinforces the notion that, like checks and debit cards, credit cards are another method of payment and not an extension of income. Your account balances are now:

• Direct Deposits: $0.00
• Monthly Expenses: $400
• Credit Cards: $100

July 13 comes and your paycheck is deposited in to your Direct Deposits account. Your balances are now:

• Direct Deposits: $500
• Monthly Expenses: $400
• Credit Cards: $100

You pay more bills totaling $300 and buy something else on credit card for $100. Your total outflow was $400. Again, of that amount, $300 was debited, and you transferred the $100 credit card charge to the Credit Cards account.

When July 27 rolls around and another $500 paycheck is deposited in to the Direct Deposits account. You balances now are:

• Direct Deposits: $1000
• Monthly Expenses: $0.00
• Credit Cards: $200

Your credit card bill comes, and it is for $200. You pay it from the Credit Cards account – in full. No minimum payments, finance charges, or interest. Your balances are now:

• Direct Deposits: $1000
• Monthly Expenses: $0.00
• Credit Cards: $0.00

July winds down and you prepare for August by transferring $1000 from Direct Deposits money to Monthly Expenses account  and the cycle begins again.

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Sooooo, there you have it?  Confused?  Inspired?  Please feel free to send us any questions.  We will gladly assist in clarifying any of this information.  I can assure you that this budgeting system is a blessing in keeping your finances on track..   Challenge yourself to at least give it a try, and let me know what you think {wink}.  Better yet, do you have any tips to share?

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