budgetingandsavings

When it comes to spending money, I think I am like most people. If I have a Dollar in my
pocket, then I have to spend it. Budgeting is probably one of the hardest things to do,
but once you have a system in place, it gets a lot easier. The first thing you can do to
budget your money is to give yourself an allowance. The way you do this is by figuring
up all your petty expenses for one week. Such as: gas money, eating out, going to the
bar, or any other small expenses you have during the week. Figure out the total. We will
say the total is $50.00. Now when you receive your paycheck. Keep fifty dollars, and put
the rest in the bank. Never carry more than your allowance in your wallet. If you don't
have it you won't spend it.
As for the credit cards, I have a little trick I use to keep me from using them to often.
Take a portion of your weekly allowance, say ten dollars, and put it on top of your credit
card. When you want to buy something with your card, you have to use the ten dollars
first. If your purchase was twenty dollars, then use ten dollars cash and ten on the
credit card. Having the cash on top of the card acts like a Stoplight. If the cash is there,
you can use the card. If it is not, then ask yourself if you can wait for a week to buy
what you want to buy. If you really want to by the item, you will go back later and get
it. Of course there will be emergencies sometimes, but this has saved me much money.
Now let me introduce you to my budgeting system. It took years of trial and error to get
to this, but now it is a smooth running machine. I've been using it for about 10 years
now, and my most recent credit score is 815. The highest you can go is 850, so I am
doing pretty good. If you have a high credit score, then you probably have good
budgeting skills. My system is all about simplicity, once in place, you don't have to think
about it anymore. Sure there is some initial work you have to do to get set up, but after
that it is fairly simple.
I have placed a budgeting worksheet at the end of this chapter. Make some copies of it,
most likely you will not like the first one and you'll probably end up doing a couple of
these. This system requires you to have two checking accounts, and one savings
account. I also have developed a spread sheet that does all of the figuring for you, This
system requires you to have Three bank accounts. I recommend (just to keep
temptation under control) that you keep your primary checking account in a separate
bank from the other two accounts. Your primary checking account should be at your
local bank, and you should not have an ATM card for this account. The other two
accounts should be in different bank. One will be for spend money, and the other for
savings, and feel free to have an ATM card for these accounts. I would recommend
finding a bank that does not have minimum balance requirements because one of these
accounts will have your weekly allowance, so you may zero this account out sometimes.
Having one of these accounts as a checking account will allow you to use your savings
money to write a check if there is an emergency.

There is a simple way you can open these two other accounts from your home computer.
First you will have too at least have one checking account at a local bank. Then, you
can set up the other two bank accounts with ING Direct or another Internet bank you
like. This is the way to go if you can handle a computer, just simply go to there web
sight at home.ingdirect.com and set up the accounts, it's much easer than going to a
bank and setting up the accounts, there is no minimum balance, and you will make higher
interest. First set up your savings Account, and then once it is set up, setting up other
accounts takes about two minutes.
If you Decide to use Internet banking (I recommend it) then rather then using Direct
Deposit to spit up your money, It is much easer to deposit your whole check into
checking, then use Internet banking make automatic deposits to the other account from
your checking account. One good point of doing this will be that it is very easy to
change the deposit amounts anytime you would like to make a change to your budget.
Now, take a look at the worksheet or the spreadsheet if you have it. You will need to
have your bills handy and a calculator to use the worksheet. The first step in budgeting
is to figure out your weekly pay. This is the amount you take home after taxes, and after
other deductions like, health benefits, and retirement accounts. If you have other
income, you have to also add it in. next figure the total of your monthly bills, such as
your car payment, groceries, rent, credit card bills, utility, cable, any monthly expense.
just follow the directions on the worksheet to keep it simple. Some bills are quarterly, so
you might have to do some math to break them down to a monthly total. On the sheet, I
ask you to add 10% after you add up your bills. There are always some unexpected
expenses, so 10% seems to work out good to cover them. If this percentage is too high
for you, try a smaller percentage if necessary.
I highly recommend keeping at least a five hundred dollar cushion in you Checking
account. It may take a while to build it up, but make minimum payments on your bills to
set up this cushion. It is your first defense against mistakes, and you will make some.
Five Hundred may seem like a lot, but one Car Repair could take away this cushion. If
you can't afford five hundred, start a little lower, but be very careful not to go under
your set amount.
If you are trying to budget for you and a spouse, I would recommend that you both have
a separate spend accounts. Aside from that, it is really up to you if you would like to
share the other accounts or have two separate budgets. Having separate spending
accounts will help with two people that have different spending habits.
As for credit card payments, you need to budget them as well. You have to pay a set
amount on them. Don't over do it, because trying to pay them off to fast will leave you
with no back up for emergencies. Make it an amount that you can afford every month.
As you do this worksheet, you might find that you need to adjust your spend money to
give yourself some savings. Or on the other hand if you can afford to, be a little
generous with your spending amount, because it is better for you to have a little extra
spend money than to raid your savings account all the time. Do your best not to use
your savings money.
At the bottom of the worksheet are your Direct Deposit totals. Your primary checking
gets all of the left over money; this is always the first account on a direct deposit slip.
Then there will be a set amount for your spending account, and for your savings
account. When you fill out a direct deposit slip from your job, you will need to have
routing numbers and account numbers for all the accounts. All this information will be on
the bottom of the checks you receive for the accounts. The exception is the savings
account, the routing number is always the same for each individual bank, but you would
also need to have your account number. Once you think you have figured out your
budget. Don't be afraid to try it out. Try it for a couple months. Once you get started
with this. It will become easier and easer to manage your money. This system can still be
done without direct deposit, but in that case it would be best to make one deposit into
one account, and transfer money to the other accounts through online banking, this is
very simple with ING Direct, and can be done automatically after each paycheck is
deposited into your primary checking account.
This system works great for people that have a problem keeping their checkbook up to
date. The idea here is that once this is in place you should not have to think about your
money anymore. Your bill money, spend money, and savings are all separate, and once
you fill out the direct deposit slip, you won't have to wonder if you will be able to pay
your bills or not. There is no more thinking involved. It is very important that you have a
savings account, even if you only put a very small amount in it to start with. This is your
emergency money, and the first step in getting rid of your credit cards. Aren't you tired
of paying everyone else? Think of this as paying yourself. Make room in your budget, and
put some money away. It becomes easy to ignore this account after a while. But if you
have some major auto repairs, or another emergency, then this is how you keep it off of
your credit cards. Also by putting the extra money into savings, you are less likely to
spend it when you pay your bills, but you will have it in savings if you need extra. You
must always save at least some money every month, or else the debt will just keep
rising.
Always pay higher than the minimum payment on a debt payment if possible. If it is not
possible, you should consider consolidating all your dept into one loan. The payment will
be lower, and you should be able to pay a little extra on it.
Direct deposit is a great tool. I was highly resistant to this for a long time. I guess
because it was just to technical or something. I have found it to be great for budgeting.
For one thing, it allows you to split your paycheck into 3 or more different bank accounts
in the amounts you want. It saves me a lot of hassle at the banks. I almost never go to
the bank anymore. I also can transfer money from my savings to checking from my home
computer or by phone. Since all my budgeting is done on the computer, this is very
convenient. Just because I like direct deposit does not mean I like Auto Pay though. I
have had some bad experiences with this, and I will never let anything be paid
automatically from my accounts again if I can help it. I want to have complete control of
what I pay out. I don't think auto pay is a good Idea. You need to be able to have the
control to stop payments if you want to. If you use auto pay especially from a credit
card, it is almost impossible to stop a payment. This means that once you let someone
have access to your account. You cannot even cancel that account until the bill is paid.
Be careful with anything that is auto pay, and avoid it if at all possible.

Extreme Budgeting

Extreme budgeting is for those who can't seem to Save or even keep enough money to
pay the bills. I have been working my system with varying people, and there are those
who really want to do things right, but are just too impulsive to do the right thing. I have
also found people who work a lot of over time can have a very wide variation with there
income, which makes it much harder to budget. I have found a way to make a slight
change to this system to handle this situation.

Most people either get paid Weekly or Biweekly, and most bills are monthly, so what
happens is that even though it seems that you have a lot of money in your checking
account, the reality is that it may not be enough to pay the bills when the come. The
illusion of having money especially when there is overtime involved makes people believe
that they have more to spend then they really do.

Internet banking (ING Direct) Creates some great options to solve this problem. With
internet banking it is very easy to set up an automatic withdraw on the same day you
are paid, weekly or biweekly, but also, you can set up an automatic deposit to your
checking once a month when the largest bills arrive. In this instance, your Checking
Account becomes another short term savings account, and ING Savings(internet bank) is
for long-term savings. Once you break your bills down to Weekly or Biweekly, just add
that amount to what was going to savings. Once a month set your monthly bills total to
automatically transfer back to checking. You Can adjust this any way you would like. It
could just be for your large bills, or it could cover all your bills. The only other thing I
recommend is that you keep a good cushion in your checking. I recommend five hundred
to start with. This will be needed if you are going to use this method to pay your bills.
There are always small bills that need to be paid biweekly, so you will need to have some
money available to pay them. Just realize that there is no extra money to spend once
you hit the limit you set. It is only to be used for bills.

Once you get an understanding for how this system works, you will find little variations
of how to make it work best for you. Internet banking creates a lot of ways to spread
out your money and do it fairly simple. At first, just keep it as simple as possible and
follow the easy budgeting system. If you find that you are too impulsive to do it that
way, try the extreme budgeting style.

There are four levels of saving that I have found. We covered the first two; savings and
checking. Beyond that there is short term saving, for example; saving for a new car or a
vacation. Then there is long term saving which would be for retirement. Once you have
started budgeting. It is always a good idea to take a small amount out of your weekly
pay and invest it for retirement, even if it is only a couple dollars. As you start to pull
out of debt and save more money, you will be able to invest more for retirement. As for
short term saving. I mentioned in the previous chapter about buying cars. If you pay off
a car, then why not take that payment you where making, or at least some of it, and
put it in it's own account. I like to put it in a separate account because I want this to be
money that I will not touch. This money is for a specific purpose and you want to put it
somewhere that is hard for you to get it. When it is time for you to buy a new car, it will
be ready. I also use this account as my emergency account. I try to keep a minimum
balance of $3000.00 dollars. For myself, this is an amount that should cover most
emergencies such as home repairs, or other unexpected expenses. I set $3000 as my
goal; you should make a reasonable goal for yourself. A good way to set a total for this
goal is to take your total expenses for one month, and set that amount as your goal for
savings. I will try to leave this account alone until I reach my goal. Then once the goal is
reached, I will start using a portion of the money I deposit in the account to pay extra
on my dept. If you have no Dept, then start to invest in anything that will pay you
higher interest. I invest a portion in gold and silver coins, but the options are endless
such as CD, Mutual funds, Roth IRA's, Stock Market, try different things, and use what
you feel comfortable with.
I basically have four accounts that I use. One for checking, one for saving, one for
investing, and one for spending. The only account I have attached to an ATM card is my
spending account. Using direct deposit, I make deposits in all the accounts from my
paycheck. I put my weekly allowance in an account (for spending) and use my ATM card
to withdraw it. It is more or less a way for me to keep extra money out of my pocket. If
I don't spend my allowance for a couple weeks, it is a nice surprise to find that I have
extra money in the account. The other nice thing about it is that I never have to go to
the bank. Anytime you want to transfer money from one account to the other it can be
done over the phone or online.
I have found though trial and error that it is easiest to pay bills biweekly. I get my
paycheck Biweekly, and I like to do my bills the same day as I get paid. If you are paid
weekly, this is also all right. Paying bills once a month does not work, because there are
so many different due dates for bills. You can never cover them all in one day. When I do
my bills, before writing any checks or using online bill pay, my computer program will let
me know if everything works out and if I need to move some money from savings to
checking. When I do my bills, all of my withdraws are written out on the computer in
front of me. If there is a problem, and I do not have enough money to cover my bills, I
can easily decide which bills I can wait to pay on. After all the numbers work out on the
computer, then I will write out my checks or put the amounts into bill pay, and I do not
have to worry about the bills that are still due, because when I get my next pay check. I
will turn on the computer and it will tell me what bills I need to pay. In the long run,
having a computer will pay for itself. It is very hard to make a mistake and it will keep
you from having to borrow money when you do make a mistake.