/ 20.10.10 / 7 Comments / budget
Basic Finances: Setting up a Home Bookkeeping System~ Part I
Ok girls, let's roll up our sleeves, sit down at the kitchen table and learn how to organize our financial papers so hubby (or we) can manage the finances in a responsible matter. You will probably need to go brew a whole pot of tea first, because this may be a rather long day. But the results will be worth it!! I promise!
Be strong--be brave--You CAN do this!
This could be the best day of your life even if the result may be discouraging news. Better to see trouble coming and deal with it, than to stick your head in the sand until disaster strikes.
Believe it or not, this doesn't have to be too complicated. Homemakers have been doing this sort of thing for EONS. If our mothers could do it, then so can we. Now, I'm not the king or queen of financial organization and management. I leave that to my hero, Dave Ramsey. No one that I know of can give you more practical help than him. He has all the forms you would ever need and a lot of sound advice if you are in over your head.
I think we can all agree that regardless of who makes the financial decisions, some routine for handling the bills, receipts, and the checkbook register needs to be in place. Truly, the main thing you need to know to be responsible with your money is....
- How much money do you have at the moment? (In the bank or your purse.)
- How much money is coming in? (Salary, Investments, etc.)
- How much money must go out? (Bills and Credit Card payments)
- How much will be left over for flexible household expenses?. (Groceries, Gasoline, Clothes, Gifts, Hobbies)
Before you can feel good about buying even one more 'extra' item, you must answer these basic questions. If you don't answer them, you will end up paying excess late fees, end up in debt, or end up bankrupt. Unless you make tons of money, and most of us don't, this is the bare minimum.
Now if you want to go a few steps further and get control of the family spending...and save for unexpected expenses...or get out of debt..you need to know a little bit more. First, How much have you been spending and on What? (Organize monthly receipts.) Second, How much should you spend next month and did you over spend. (Budget)
A nice final step, is to store your receipts and bills in an organized fashion for doing returns, proof for the tax auditor, and for some of us, itemizing for the accountant.
So let's get started. First, gather some supplies. You will need a...
- a checkbook register (Here is a free printable checkbook register available for download.)
- a piece of paper or spiral notebook and pen
- 3 baskets, boxes or some kind of storage containers (or even gallon size baggies) Mine came from a thrift store at $0.25 a piece.
- a shoebox or other flat box wide enough to hold a long envelope.
- long and short envelopes and sharpie or other kind of marker
- stapler and highlighter pen (Optional)
- two tabbed accordian files--one that holds long envelopes and one that holds short envelopes (or you may want to get Dave Ramsey's cash flow envelope system rather than the small file. (Thanks for the tip Shannon!)
Now, you need to do a little digging.
We need to find four things--all of your bills, checks, money, and receipts.
Gather up all of your bills. Put them in a basket or box labeled 'bills'.
Sort them into two piles...paid and unpaid.
Now scrounge up all of your receipts...every single one. Put them all in a basket, jar or container of some kind. We will sort them later. If you happen to know which are more recent and need to be entered into your check register or computer vs. old..then keep them separate. Put your checks and money in a bowl or something nearby. You don't want to lose these!
Making a Budget
The first thing we want to do is answer the questions I listed earlier. How much money do you have or have coming in, and how much do you need to spend every month? Also, WHO do you need to pay? This is called making a budget. My dad showed me how to do this...just exactly like I'm showing you. He wrote it on a piece of notebook paper. That lesson stuck like glue in my mind. I never imagined that anyone could live without one, yet a friend who did consumer credit counseling told me that most people don't?!! I would be terrified to live like that. That would be like driving down a country road in the dark and hoping you didn't hit anything...ouch!
So in your spiral note book, I want you to write the word Bills on the left side and Credit Cards on the right. It's very important to see the difference between what your normal monthly living expenses are versus the money you owe and which you hope to pay off someday. Make a list of everything that you must pay, like your house payment, car payments, charitable giving, electricity, phone, insurance, internet service, water and garbage etc. And include child support if you have to pay that. Dig through your pile if necessary to see what amount you last paid for these expenses. These are called your FIXED expenses. Do or Die..these HAVE to be paid or you won't survive. Right?
Now add below that your best estimate of what you think you need per month for gas, groceries, clothes, pet supplies, membership dues, newspaper subscriptions, postage, birthdays, and any expense that you know is coming up soon like car tags or a birthday gift. Don't forget children's lessons, diapers, entertainment, and eating out. Just make a guess of what you normally spend. You can tweak it later. These are your 'flexible expenses'. This is where you juggle to 'make ends meet'.
Now, on the right hand side, list every credit card you have and it's minimum payment. We aren't trying to find out how much you owe in total, just what the monthly minimum is. Include medical bills and any other debts you are paying off. At the end of each column, add up the figures and write the total. Add the totals together. This is approximately how much money you need to live on. These are fixed expenses too...but ideally, you will want to pay MORE than the 'minimum' payment when you get your finances in order, or you will be paying until the cows come home. We don't want that do we? Of course not! :o)
In any leftover space, write the amounts of any paychecks that come in, and any other sources of income. Write down the monthly total of all of that. Now, look at these two figures. Which is bigger? If it's your expenses, then you need to change your estimates of what you are spending in the second category (groceries, gas, supplies etc.) until it is less than your monthly income. The cash flow form above will help you do all of this and can be downloaded here. I also put my own computer version of a budget on my sidebar. You can download it here.
Wow..can you believe it? You have accomplished so much!! Good job! Don't panic if you didn't quite get the ends to meet--get your husband to help you tweak all of the categories, until you at least break even. I really think we need to stop here. Don't you? You have done more than at least 60% of Americans ever do, just by facing your finances and getting it down on paper. Now, if there is a bill that is due any minute, by all means..pay it. But keep your stub...and hold on to the rest of your work, so we can continue tomorrow. :o)
We'll cover these topics in the next few days...
My New "Hubby Basket"... :o)
- Making a 'hubby' checklist of all your bills with who needs to be paid, how much, acct.nos, passwords etc. and setting up a system to pay them either online or by hand.
- Setting up a checkbook and balancing the checkbook, so you know exactly what is in the bank.
- Controlling spending with cash and envelopes. How to store your receipts and how to use them to figure out what you are spending each month for food, gas, clothes, and groceries.
- Finally, I'll show you a great system for filing all of those receipts and bills so you can find them when you need them, do taxes, and keep the right amount in case of an auditor.
I may pop in a quick trip to the Renaissance Faire as a break though... or perhaps take you along with me to our little 'country market', but we will get through this! Great job girls! See? We can do it and make it 'hubby-friendly' too! (Oh yeah...don't forget to enter my giveaway. :o) I'm giving away two quilted totebags with the quilt block of your choice. I will hand quilt it myself. Now that's a bargain!)