Carolyn O’Neil (a registered dietitian) asked her readers the same question. It seems that no matter how we choose to eat, we always pay a price–either in money or in poor health.

The University of Pittsburgh Medical Center offers some suggestions for eating healthy without breaking the bank.

I’d love to hear if healthy eating has changed your spending, and your tips and tricks for eating healthy on a budget.

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Greg over at StackBacks.com has a unique and GTD friendly way of managing cash involving envelopes, index cards, and paper clips. His method is a great way of divvying out your cash so you don’t spend it all at the beginning of the month, leaving you living like a pauper at the end of the month. It’s essentially a sort of cash tickler file (look under “Tools and techniques”).

Please let us know how you manage your cash!

Cash Allowance File

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Becoming a black belt and having a “mind like water” in your personal finances is very similar. It means you can take whatever is thrown at you without knocking your finances out of control. You can respond to any situation with perfect balance. Unexpected events or changes in your finances, good or bad, can be handled with optimum efficiency, and little or no stress. It means you can direct the flow of money where you need it almost effortlessly.

In an effort to help people gauge where they are in their personal finance development, I’ve defined what people at the various “belts” might look like. Where are you?

White Belt

You’ve recognized there is a problem with your finances and have committed to taking control. Recognition that there’s problem may come as a nagging doubt that you’re not meeting all your financial goals or a harsh reality check as you face mounting debt. You have a lot of stress concerning finances (even if you’re living within your means). You tend to fight with your spouse every time you discuss financial matters. You recognize your spending isn’t in line with your true values. You have no idea where all the money goes from month to month. You may be living paycheck to paycheck. If you saved $5 on your phone bill, it would just disappear somewhere but you don’t know where. Your idea of an emergency fund is a credit card or Home Equity Line of Credit. You frequently pay late fees on your bills and unnecessary bank fees. Net worth? What’s that?

Despite your lack of financial control, you have a strong resolve to take action even though the thought of facing the “deep mess” of your finances seems overwhelming. You and your spouse have agreed to work together. In an effort to get your spending under control, you’ve started using cash for your “out-of-control” budget categories. You’ve stopped using credit cards somewhat reluctantly and possibly out of the sheer pain of your dire financial straights. Despite some complaining, your family has agreed to use cash as well. You’ve taken initial steps to figure out what your basic monthly income and expenses are and have tried budgeting for at least one month even though it doesn’t match reality yet.

Most importantly, you’re no longer willing to BE IN DEBT!

You’re no longer willing to constantly WORRY ABOUT MONEY!

You’re no longer willing to FIGHT ABOUT MONEY!

You’re no longer willing to PAY LATE FEES!

You’re committed to TAKING RESPONSIBILITY FOR YOUR FINANCES!

You’re committed to WORKING THROUGH FINANCIAL ISSUES TOGETHER WITH YOUR SPOUSE!

White belts come in many shapes and sizes. Of course, those steeped in debt and on the verge of bankruptcy can be white belts, but so can those who are living within their means (see below). Being a white belt means you don’t have total control over where your money goes. Your spending doesn’t reflect your true values and is not conscious. The white belt is about recognition and commitment. You’ve recognized a need to change and are committed to doing what it takes to change.

Green Belt

You’re well under way implementing your financial-management plan. You’ve budgeted for at least 3 months in a row and have worked many of the kinks out. Your budget actually reflects reality.

You meet with your spouse about every two weeks to keep things on track. You often have to implement the 30-minute rule and meet several days in a row to prevent total melt-downs.

You’ve taken all credit cards out of your wallet and are using cash for all of your “in-person” spending. As a result, for the first time you feel like you have control over your spending. You’ve even started developing your own unique ways of managing your cash and have a tendency to give spontaneous testimonials about the virtues of cash whenever someone acknowledges your use of a cash envelope.

You’re well under way saving for a short-term emergency fund. You may not have it fully funded yet but you already notice feeling much less stressed having at least something in place. For the first time in your life, you may have even experienced an emergency and had the money to pay for it. You have created an initial net worth statement and have a general idea about your overall financial status.

If you saved $5 on your phone bill, you could probably redirect it rather than letting it disappear. You no longer pay late fees or bank fees. If necessary, you’ve made major changes in your lifestyle to ensure you can live well within your means.

Brown Belt

You’ve been on a zero-based budget for over 6 months and things are really humming. You may have occasional refinements, but things are mostly on cruise control. You’re able to manage your finances on one meeting a month and are able to get through most meetings without any arguments.

You’ve gone through at least one set of envelopes. You find that you’re keeping the cash envelopes the bank gives you when you cash a check or make a withdrawal because they are a better size than regular envelopes.

You’re friends have started noticing that you pay cash all the time and have asked you about it. You find yourself preaching the cash gospel and sharing your success whenever you can.

You have a fully-funded short-term emergency fund and have started reducing consumer debt or increasing retirement savings. You have a strong sense of control over your finances and can see significant improvement every time you refresh your net worth report (which you do at least once a quarter). You and your spouse have reconciled your financial differences and have a new-found sense of unity when it comes to finances. You’ve created a list of rules concerning what you both consider to be an emergency as well as what you want to do with any unexpected windfall money. By making these decisions ahead of time while you’re calm, you avoid big arguments when these events occur.

Black Belt

You laugh in the face of emergencies (mua-ha-ha) and can easily and confidently deal with anything thrown at you. Seriously, for all practical purposes financial emergencies don’t really exist for you any more. If you save $5 on a phone bill, you’re financial system allows you to know about it and easily redirect it exactly where you want. You have complete financial control over every dollar.

You no longer worry about finances. Instead of worrying about how to pay the bills on time, you think about what investments to make or which debt to pay off next. You’re amazed and shocked that people even pay late fees (you obviously are having a bout of selective amnesia). You are aggressively on track to pay off all consumer debt and/or save for retirement. In fact, sometimes you find it hard to spend extra funds because you’re so excited to become debt-free that you want to reduce your debt instead.

You finally feel like where you spend your money is a reflection of your true values. You and your spouse see eye-to-eye concerning finances. You only have major financial discussions when your financial situation changes dramatically.

You not only calculate your net worth quarterly, but also have calculated when you’ll become financially independent.

You kind of wish you’d get fired so you could find a job you really like (you have a full emergency fund and could get by for 3 to 6 months without any income). You only have to spend about 30 minutes a month on average managing your finances. You’ve cut up all your credit cards because you just don’t need or want them anymore.

Your belt level isn’t about debt, savings, or your net worth.

Some of you may have noticed that my description of the belts didn’t include savings percentages or require you to be debt-free. Your belt level isn’t about debt, savings, or your net worth. It’s about your ability to control your money, ensuring that each dollar is directed where you want. I’m sure I’ll get a lot of flack for saying this. Of course, savings and debt elimination are cornerstones of a solid financial foundation. But to enable you to save and pay off debt, you first have to get a handle on your inflows and outflows. As you gain greater levels of financial control, you can easily reach your savings and debt-reduction goals at an ever-accelerated rate.

The good news is, you can become a financial black belt even if you still have debt or haven’t reached your long-term goals. Of course, if you are a black belt, it won’t be for long before you do. As you progress in your career and get raises, or as you receive windfalls, you will be able to direct those extra funds with great focus and power to eliminate debt and reach your long-term goals. That’s the power of a black belt.

Take your finances to an “11″

I can’t avoid referencing this segment from This Is Spinal Tap. If you haven’t seen it, you should take a look.

I know many people who live within their means, pay off their credit card bill every month, and think they have arrived in terms of financial management. But the fact is, you can do these things and still be a financial white belt. I know this for a fact because I’ve been there.

There was a time when our income greatly exceeded our expenses. We saved ten percent and gave to our church. We also lived large and bought just about anything we wanted and were still living within our means. For the most part, we just accumulated a bunch of “stuff” and made a lot of emotional, at-the-register purchases. As we look back we kick ourselves for not using that money in a more conscious way. Had we been financial black belts, we could have greatly accelerated our journey to financial independence. Today, even though we have downgraded to a single income and increased our expenses (mortgage, child), we are doing more with what we have now than we did with two incomes, no children, and low living expenses. As a result we have been able to reach financial goals with tremendous speed and ease.

I’m not saying you have to choose between having fun with your money and saving it for later. As a black belt, you can set aside funds for frivolous spending and still aggressively meet your financial goals. The key is to spend consciously, making decisions as they relate to your values and your finances as a whole. If you plan wisely, you can have the best of both worlds.

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Q: what do you think about not spending anything on credit cards? everyone else is in trouble so why not use cash only!”

For the past few weeks I couldn’t get this statement off my mind. It’s one thing to have a strong position . It’s quite another to insult those who follow a perfectly legitimate and arguably superior system of financial management.

To resolve this issue, or at least let the blog-reading community decide for themselves, I challenge Ramit to a good-spirited showdown: Credit Cards vs. Cash. Ramit can present the credit-card arguments and I’ll present the cash/debit arguments. The readers on each side can also chime in. I read a similar showdown about productivity a while back and thought it was useful.

Please leave a comment and let us know what questions or views do you have about credit cards vs. cash? What questions would you want to see addressed if a showdown takes place?

If Ramit accepts we’ll decide the terms, time, and format. Let’s have Ramit express his spirited feelings in a more articulate and useful way.

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“While I try my best to “get rich slowly” I have one huge issue: a husband. My husband likes to spend money. I’m referred to as the “Thrifty One Who Won’t Allow Me To Buy Stuff” and he’s referred to as “That Jerk Who Buys Stuff”. Do you have any advice for couples that need to have the other half put on a strict budget without making them feel like a child?”

I posted a comment at Get Rich Slowly in response, but I thought this excellent question deserved a more thorough answer, so here goes.

In my experience, there are 3 keys to making your personal finances work as a couple:

1. If you don’t already have an established method of managing finances, decide together to try an established, published system. Agree to stick to it exactly, unless you both decide to deviate.
2. Make the “personal” budget category a high-priority and fund it as generously as you can.
3. Don’t discuss finances for more than 30 minutes at a time or past 10:00 at night. If you don’t get through all the issues, meet again tomorrow.

1. If you don’t already have an established method of managing finances, decide together to try an established, published system. Agree to stick to it exactly, unless you both decide to deviate.

My wife and I have always lived within our means and have never had debt problems. However, we never saw eye-to-eye on the specifics of how to manage finances. I always felt like we were doing great; we were living within our means and saving 10% of our income for retirement. I figured we could spend the rest however we wanted. My wife always felt like the rest of our money was just wasting away on things that were useless. Even though we were doing better than a large portion of the population, she continued to experience significant anxiety and discontentment.

We both had read several personal finance books and tried to persuade the other to adopt the principles, but to no avail. I realize now that in many cases we weren’t rejecting the ideas, we were rejecting the messenger (the spouse).

Finally, after 10 years of marriage we faced a series of emergencies that forced us to either move from our home and dramatically reduce our standard of living or get a tight grip on our financial management. We figured we could barely make it through if we carefully managed every dollar.

In our desperation, we decided to attend Dave Ramsey’s Financial Peace University, a 3-month, weekly course in managing personal finances. Knowing that one of us had always rejected financial ideas proposed by the other, we agreed that we would follow the program to the letter, even though we didn’t know what it would consist of. If we BOTH disagreed (which we did at points) with the program, then we could alter it. But if only one of us disagreed, we would have to follow the program as the default.

This was one of the BEST decisions we’ve ever made in our personal finances. It allowed us to stop fighting each other. By having a completely objective third party telling us what to do, it was easier to accept the concepts. If we both felt there was a better way of doing things, we weren’t tied to Dave Ramsey’s system and could discuss how to alter it to better fit our needs. In short, it factored out personal grudges and judgments. We were left to judge the actual content and not the content-delivery system.

If you’ve always had a hard time agreeing upon a system, TRY THIS OUT! Don’t get stuck on a particular method. If you’re convinced a certain system will work and your spouse is not, find a different system you can both agree to try. Otherwise, your spouse will be resisting you rather than the content. It’s way more important to just get on the same page. Most main-stream systems for managing finances are theoretically sound. If you first get a system established, then you’ll at least have a base system from which you can discuss deviations.

2. Make the “personal” budget category a high-priority and fund it as generously as you can.

The “personal” budget category is a key to helping a budget work. Having personal money that you, and only you control makes budgeting as a couple tolerable. It’s easy to imagine why couples are financially miserable when they have to negotiate every single purchase with their spouse.

My “personal” funds are what I really care about the most. I don’t really care that much about groceries or household items or hair cuts. Sure, I care on a large scale – I don’t want to spend so much that we can’t meet our other goals. But I’m not that emotionally tied to them, so I can discuss them with my wife non-emotionally. On the other hand, if I had to negotiate every personal purchase – every book, CD, and soda – I’m sure we’d end up in endless arguments every month!

The fact is, many couples end up spending personal money anyway. They just hide it or manipulate the system. Why not explicitly budget “personal” funds and reap the benefits of knowing that money is yours.

Here are a few of guidelines for your “personal” budget category:

Separate checking accounts are ok for personal funds

It’s important to have at least a small financial slice to call your own. You can manage it however you want. If you don’t want to budget it, that’s ok. Waste it all if you want. Or save it for that new electronic gadget. While my wife and I keep separate checking accounts for our personal funds, we still have access to look at each others’ accounts if we want. But I don’t think I’ve looked once and don’t really care how she spends her funds.

Be as generous as you can afford

My wife and I budget $100 each for personal funds. Whenever I mention that to someone, they are always shocked the figure is so high. Well, you can afford to do that when you don’t have a car payment . Seriously, I give our personal fund a huge amount of credit for making our budget work and go smoothly. $100 is more than enough to feed my book-buying addiction. It’s also substantial enough that I could fairly quickly save for large purchases of several hundred or even a thousand dollars. There’s almost nothing I couldn’t afford over time, even that new HDTV I really want.

Personal funds can also act like a shock absorber, similar to the “cushion” budget category. Sometimes I want to eat out with my co-workers more than I have money allocated for. No problem, I just use personal funds. Similarly, I often buy my boy a toy now and again with personal funds. It’s easier than waiting and negotiating it with my wife. With such a generous personal fund I really don’t feel a loss from $5 or $10 every now and again.

One last benefit that can be a huge plus in marriage; having personal funds can make gift giving more meaningful. Before we started budgeting personal funds, gifts seemed less meaningful because all our funds were pooled and negotiated. Budget meetings were like, “Hey hun, I want to buy you some roses this month, so let’s budget $20.” How romantic. Now, when I give my wife spontaneous gifts, they are even more meaningful because I use my own money. I’m sacrificing my own interests for her sake. Let the romance begin.

Obviously, not everyone will be able to afford $100 each for a personal fund. We started out at $20 each and grew it from there as we could. Do the best you can. I recommend allocating at least $20 each for “personal.” That’s enough to buy one medium-size purchase like a book or CD a month. You certainly need to be meeting your debt reduction and savings goals first, but your “personal” and “cushion” categories should be close behind in priority.

Keep it even

This one’s easy. You always allocate the same amount to each person. I’ve never found a good or fair way to do it otherwise. This also goes for personal funds that we allocate from bonuses or other windfalls. If we get an unexpected windfall and I want that new road bike for $600, I should expect my wife to get $600 to spend how she wants as well. You can discuss variations to this rule if you like, but it should be the baseline assumption.

3. Don’t discuss finances for more than 30 minutes at a time or past 10:00 at night. If you don’t get through all the issues, meet again tomorrow

Doing finances as a couple is hard enough. Why complicate things by dragging a tired or distracted spouse through sometimes tedious and intense discussions. I’ve found that almost exactly after 30 minutes of discussing finances, I start to tire of the conversation. Suddenly I become contradictory and hard to work with.

Similarly, after 10:00, financial discussions should be prohibited. We’ve tried discussing finances after 10, or even 11pm and it wasn’t a pretty sight. I disagree with everything and am very grouchy. Every time it’s ended with contention and bad feelings.

These guidelines should be adjusted based on the personalities involved. Maybe both partners have a nicer demeanor and higher tolerance for talking about finances than me. Or maybe both are night owls. Great, expand the limits. On the other hand, you may need to shrink the allotted 30 minutes or move up the evening cut-off time if finances are a really tough issue. Just try to meet for a minimum of 15 minutes or it will be hard to make progress.

If you’re establishing a budget for the first time and have lots of issues to discuss, you may need to meet several nights in a row for 30 minutes to get through everything. That’s ok and should be expected. At least you’ll be able to do so in a civil manner.

Limiting the time spent discussing finances has a great benefit. You become much more focused on the issue at hand. Agendas for budget meetings are entirely appropriate and helpful. A time limit will help you get clarity on exactly what needs to be addressed. Rather than allowing yourselves to digress, you will stay on topic and have more efficient meetings. This can also have the side effect of making things less emotional which is a VERY good thing when talking about finances.

Conclusion

It’s no surprise money is the #2 cause of divorce. In our marriage, even when our financial situation has been good, it’s still been one of our major issues. Following these steps has helped us get to the point where finances are no longer a major issue. For the first time in tens years, we see eye-to-eye. Sure, we still have an occasional disagreement, but these steps have alleviated a huge amount of tension and stress in our relationship. I hope they can in yours too.

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Starting a new personal finance or budgeting system can also be a deep mess. It will usually get worse before it gets better. But it WILL get better with consistent effort.

One of the painful things about getting control of your finances is that you inevitably find out you don’t have nearly as much income as you thought to pay for all your expenses.

My wife and I came to this stark realization and it wasn’t easy. We allocated all our income to our necessities and high-priority goals and realized we didn’t have any left for vacations, gifts, or other desires. Over time, as we’ve improved our financial management and increased our income, we’ve been able to meet some of these desires, but we still frequently have to face the stark reality of a limited income.

Some friends of ours also recently felt the “deep mess” of their finances. After going for years living on the edge of their means, they finally sat down and took a hard look at their finances. When they realized that they weren’t setting themselves up to win financially, it wasn’t pretty. All of a sudden they had to look really hard at their values and what expenses and goals were the most important. Heated discussions ensued as they worked out their differences concerning personal wants, lifestyle desires, and financial goals. It’s hard to realize that you can’t keep living the way you’re living. We are creatures of habit and comfort. But after working through their differences, they were able to make better decisions that set themselves up financially to win. In fact, they made some significant changes in their lifestyle including their housing situation.

For some people, facing the hard truth and uncovering the deep mess forces them to make major lifestyle decisions. The biggest single expense for most people is housing. If you are constantly squeezed financially and have already done your best to lower your spending, you probably are paying too much for housing and may need to downgrade. Especially recently with interest rates rising, those who got into a house with a variable-rate mortgage may not be able to meet the inflated monthly payments. They become “house poor,” barely able or unable to meet all their needs and none of their wants. Of course, it ends up being a values issue, but I personally would rather downgrade my housing to be able to have more of my other wants.

Dealing with finances is certainly not easy, especially as a couple. The good news is, once you take all of your finances “out of the closet,” at least you’ll know what you’re dealing with and can make intelligent decisions from there. It’s better to know the stark, sometimes harsh truth than to live in ignorance, hoping or inaccurately assuming you’re on track to meet your financial goals.

What have been your experiences uncovering and reorganizing the “deep mess” of your personal finances? How did it turn out?

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Overview

• Use cash for out-of-control categories – Since you may not know when your next paycheck will be, it’s more important than ever to keep a tight grip on variable expenses that tend to get out-of-control.
• Build up a short-term emergency fund (STEF) equivilant to four weeks of expenses – A STEF will help smooth out the bumps inherent in an irregular income
• Determine the timing and priority of expenses ahead of time – Planning the order in which expenses must be paid and allocated will relieve a ton of stress. You’ll know exactly where your income needs to go before you even get it.
• Create a sample budget as a reality check and baseline – A sample budget helps to ensure you are not only living within your means but also achieving your high-level, long-term financial goals.
• Chunk your income and allocate it once or twice a month – By using your STEF as a shock-absorber for fluctuations in income frequency, you can almost budget like a good-old corporate employee. While you may not envy the corporate lifestyle, a steady paycheck sure makes budgeting easier. By allocating your income in chunks you can budget like a corporate employee while keeping a self-employed lifestyle.
• Create a “just-in-time” budget, allocating only what you need until the next paycheck – By allocating only what you need until your next paycheck, you’ll be able to squeeze every penny out of each inflow. Don’t allocate your full grocery budget for the month if you only need half of it until your next paycheck.

1. Use cash for out-of-control categories

My first recommendation is to use cash for variable expenses that tend to get out of control. This is crucial for living within your means. You’ll be amazed at how much you can reduce and control your spending just by following this principle. Using cash will give you complete control over the total amount you spend in a given category. When the cash is gone, it’s gone. This is especially important when you need to make the most of each monetary inflow because you may not know when your next inflow will be.

2. Build up a short-term emergency fund (STEF) equivilant to four weeks of expenses

The second step is to build up a short-term emergency fund equivilant to 4 weeks of expenses. This step alone could save you hundreds of dollars in late fees and will give your life a little more peace. It will also keep you from going into debt when an emergency hits. Most importantly for those with an irregular income, a STEF will allow you more flexibility in budgeting and will help compensate for lost income during periods of unemployment or under-employment. For detailed instructions on how to create and manage a STEF, see my previous post.

What if your income varys drastically?

If your income varys drastically, you may want to increase your STEF to 2 or even 3 months of expenses. The more drastic the fluctuations the more of an emergency fund you’ll need. The goal with the emergency cushion is to store up funds in times of plenty to compensate for the times of scarcity. Start with a STEF of 4 weeks and adjust up as needed. However, don’t adjust down. A STEF should be a minimum of 4 weeks of expenses.

3. Create a “Timing of Expenses” list

A “timing of expenses” list simply shows all your bills and when you have to pay them. This will help in our next step to prioritize the order in which expenses should be paid. It will also act as a reference to help ensure you pay your bills on time. To avoid late fees, make sure all your bills are on auto-pay. If auto-pay is not available, highlight the bill so you’ll always remember to pay it on time. As you write your bills down, note on each item if the payment day changes from month to month. There are three main scenarios:

• Paid on the same day each month (e.g. on the 15th of every month)
• Paid every x number of weeks (e.g. paid every other Tuesday)
• Paid every x number of days (e.g. paid every 30 days).

Once you create this list, updating it every month should only take a minute. After a few months you should be able to predict within a day or two when each expense will occur.

4. Create a “Priority of Expenses” list

Note: The “priority of expenses” list and the “timing of expenses” list can be combined depending on personal preference.

When living on an irregular income, it’s important to have clarity ahead of time about exactly where your income will go when you’re paid. Having a pre-determined plan combined with a STEF will help you sleep well at night and decrease the feelings of impending doom and uncertainty that you won’t be able to pay the bills. The “priority of expenses” list is the main tool in helping you decide ahead of time where your income will go. It is essentially a budget arranged chronologically and by importance, rather than by grouping similar categories. You will refer to this list every time you are paid in order to determine where the money goes.

First, list out all your bills in chronological order

List all your bills in chronological order. This will show you the hard landscape that your other categories have to fit around.

Next, list out the rest of your remaining budget categories in order of importance

For most, this list will probably start with necessities like grocery and clothing, followed by high-priority items like savings (STEF, retirement, long-term savings) and debt reduction. Of course, housing would also be considered a necessity but is probably listed under “bills”.

As an example, my list might be ordered like this:

• Bills (in order of date due)
• Mortgage – 12th
• Utilities – Every third wednesday
• Car payment – 23rd
• Allocations (in order of importance)
• Grocery
• Gas
• Cushion
• STEF (if needed)
• Retirement savings
• Medical
• Car maintenance
• Haircut

This is an extremely abreviated list but you get the picture. After the bills, the most important categories are first and the least important, last. In other words, I first need to make sure I eat and can pay for necessary travel. Then I want to make sure I pay myself (retirement savings) and replenish any STEF if needed. Expenses like medical and car maintenance may not be used every month but will accumulate over time. Therefore it usually won’t matter when in the month I assign those allocations. If I happen to be sick early in the month, I could either use medical funds already allocated in previous months or move that expense up on the list for just that month. Finally, I figure I can allocate my haircut last. If I have a bad month, I could go without one entirely.

Your “priority of expenses” list shouldn’t vary much, if at all, from month to month. Include all your budget categories, even if they don’t apply every month. If you have categories that don’t apply in a certain month (like birthdays), just skip it and move to the next category when allocating funds.

5. Create a sample budget as a reality check and baseline

Having an unpredictable income makes it hard to ensure you’re meeting all your financial obligations, not to mention your financial goals. Therefore, it’s important to create a sample budget based on averages to see if you can meet your obligations AND achieve your goals, despite fluctuating income. The sample budget will give you a baseline from which you will vary from month to month based on your actual income. You should update your sample budget whenever you have a significant change in overall income or expenses to ensure you’re still on track with your long-term financial goals.

First, calculate your average income over 6-12 months. Then calculate your typical monthly expenses including contributions to savings and other financial goals (e.g. debt reduction). Enter in budget amounts for a sample month including these income and expense figures.

If you can’t meet all your obligations AND financial goals on your current average income, you’re due for a change. Otherwise you will never get ahead and always be flirting with increased debt. You need to eliminate unecessary expenses or find additional income streams until you can meet all your obligations, necessities, AND savings goals on your average income. In some cases, a dramatic change in lifestyle may be in order.

6. Creating your actual budget – tips and tricks

Now it’s time to create your actual budget. All the steps until now have helped you create a solid set of reference materials to help you make budget decisions. In fact, you’ve basically made all the decisions about your budget already. Now you simply need to adjust the timing of payments and allocations based on when your income is available and how much there is.

Dealing with income

There are two ways to deal with income depending on how frequently you’re paid. If inflows are infrequent – roughly once or twice a month – treat each check individually and allocate it only for the time period until your next check. If inflows are frequent – roughly more than four times a month – group the inflows and allocate them once or twice a month.

Allocate infrequent inflows check by check

If you’re paid once or twice a month, it’s most efficient to allocate each check individually for the time period until your next check. Let’s look at an example. Let’s assume you are paid $2,000 on the first of the month and you anticipate you’ll be paid again in ten days. Refer to your “priority of expenses” list, determine which bills are due in the next ten days, and allocate the $2,000 accordingly. If the $2,000 doesn’t cover all your bills, or it doesn’t cover the bills and your necessities (e.g. food) for the next 10 days, use funds from your STEF and allocate it as needed. In this case you would designate the STEF amount used as “income” on your budget.

If the $2,000 covers all your bills and necessities for 10 days, continue on down your “priority of expenses” list allocating until the $2,000 runs out. Remember, after your necessities are allocated, replenishing your STEF should take top priority.

Allocate frequent inflows in chunks

If you recieve inflows more than four times a month, it’s easiest to allocate your income in chunks rather than each inflow individually. If you recieve your income in the form of checks, save them up and deposit them twice a month. If your income is automatically deposited into a bank account, just wait and allocate it all every two weeks. It’s easier to allocate a larger chunk of income twice a month than to constantly be allocating fragmented deposits. With your full STEF in place, you’ll be able to safely deal with income twice a month without worrying about negative bank account balances. The STEF acts as a shock absorber, allowing you to budget almost as though you had a regular income.

Split up single budget categories and allocate them in smaller pieces to create a “just-in-time” budget

Occaisionally you may want to split up a single category, allocating part of it with the current inflow and part with a later inflow. If income is tight, this type of optimization will help you squeeze every penny out of a paycheck. By doing so, you create a “just-in-time” budgeting system, allocating only what you need, when you need it.

For example, Let’s say you have an inflow of $2,000 at the beginning of the month. $1,000 may go to a housing payment, $200 to utilities, and $300 for a car payment leaving you with $500 to allocate. Even though you could fully fund a $300 grocery budget category with the remainder, doing so wouldn’t leave enough for other categories like gas, personal, and cushion. Instead, if you think your next inflow will be in two weeks, just allocate what you think you’ll spend in the next two weeks on each budget category. Instead of allocating the full $300 for grocery, you might be able to get by on $150, leaving you more money to allocate to your other important categories and making it less likely you’ll need to dip into your STEF.

Allocate bills/obligations first, then everything else

Every time you allocate money for a period, follow the “priority of expenses” list, first allocating your bills and obligations and then allocating the rest to your other expense categories according to priority. Your allocations may vary from month to month but having the “priority of expenses” list should make the process much easier.

What if I make more than average in a month?

If you make more than average in a month you should have already referred to your “priority of expenses” list and funded all your budget categories. With the remaining income you should fully replenish your STEF to prepare for future months when you recieve less than average income. Allocate the rest however you want.

What if I make less than average in a month?

First cover all the expenses you can from your allocated categories. Hopefully you will already have most of your expenses allocated already. If you run out of income to allocate, you can either take money from your STEF or skip the remaining categories if they are optional (like “haricut”). Fortunately, by the time you run out of income to allocate you should be near the end of your list where the categories are less important. Depending on how much your income varies, you may need to dip into the STEF quite a bit. It’s ok, that’s what the STEF is for. In the worst-case scenario, you should be able to cover a whole month of expenses on NO INCOME.

Conclusion

With a little planning and a methodical approach, budgeting on a self-employed or irregular income can be just as easy as budgeting on a regular income. By using the techniques above, you can take much of the variability out of your planning and know ahead of time exactly where your money should go.

Please let me know your comments and questions. Also let me know if there are points that need additional explanation or clarification. Do you have any additional tricks you’ve learned? Please leave a comment and let me know!

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More From sjpeer

• 3 reasons most budgets don’t work and how to fix them (a.k.a. How to create a budget that works)
• How to create a zero-based budget
• How to become a personal finance “black belt” | Getting Finances Done

If needed, review the following posts and start TODAY!

• How to create a zero based budget
• 6 ways a short-term emergency fund can help save your budget
• How to control and track your spending effortlessly

Please post a comment with thoughts, questions, and experiences.

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• Using a spouse agreement contract in your personal finances
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A short-term emergency fund can:

1. Prevent major budget disasters
2. Help you prevent fees from late bill payments, overdrawn accounts, and insufficient funds.
3. Keep you out of debt when emergencies occur (or from going into more debt).
4. Smooth out errors in electronic-funds processing.
5. Help smooth out large fluctuations in income for those with self-employed or irregular incomes.
6. Help you get a month ahead instead of always playing catch up

This post will address the benefits of a short-term emergency fund as well as how to create and manage one.

Benefits of a short-term emergency fund

1. Prevent major budget disasters

Emergencies large and small are a huge obstacle to consistent budgeting. Many go through all the effort and pains of creating a budget only to have it completely thrown off course at the first emergency. They figure that budgeting just doesn’t work and give up. A short-term emergency fund (I’ll use STEF for the rest of the post) will allow you to absorb emergencies and stay on track. In all but the most extreme situations, your budget will stay in tact and may not even change at all.

2. Prevent fees from late bill payments, overdrawn accounts, and insufficient funds.

Even with a budget in place, you still may run the risk of having more bills come due between paychecks than you have funds in your checking account to pay. One overdrawn account can trigger not only its own fee, but can cascade down the line causing late bill payment and insufficient funds fees. One occurrence can easily add up to over $100 dollars. Your STEF will make these fees a thing of the past. You will never have to worry about having enough funds at the right time. Even better, you will never pay these outrageous fees again.

3. Stay out of debt when emergencies occur (or from going into more debt).

What do you do when there’s an emergency? Most people pull out the credit card. Medical providers are also great at setting up payment plans to help you go into debt. The emotional effect of such emergencies makes you feel like there’s no use trying to get out of debt. Imagine if you were able to pay that $1,000 medical bill in cash! With a STEF in place, you can.

4. Smooth out errors in electronic-funds processing.

I’m a huge proponent of automatic and electronic payments. However, with the blessings of technology come some occasional curses. Errors in payment processing due occur and are not all that uncommon. They are usually fixed quickly. But if your direct deposit was a few days late and your mortgage payment occurred the next day, you could be in trouble. With an STEF in place, you won’t even notice these glitches.

5. Smooth out large fluctuations in income for those with self-employed or irregular incomes.

I’ve had many comments asking how to budget on a self-employed or irregular income. While I plan on addressing this issue more closely very soon, creating an STEF should be your first step. The more your income fluctuates, the more important an STEF becomes. Your STEF will absorb those months when income is lower than usual and can be replenished when your income is higher than usual. Budgeting will be easier to manage and much less volitile.

6. Get a month ahead instead of always playing catch up

Essentially, an STEF helps you get a month ahead of your expenses. Instead of ending the month with close to a $0 balance in your checking account, you will always have a buffer of hundreds or thousands of dollars. The STEF will help eliminate anxiety about whether there’s enough money to pay the bills or if you’re going to bounce a check. Without the STEF in place, you will have these worries even if you’re budgeting correctly.

A short-term emergency fund should be the first priority in your financial strategy

A short-term emergency fund is so important, it should be your first financial priority, even before savings, retirement, and debt reduction. I’m NOT necessarily saying you should stop your 401K to build an emergency fund. I AM saying you should divert as many liquid funds to your STEF as you can.

What is a short-term emergency fund?

A short-term emergency fund should consist of 4 weeks of expenses not including savings, debt-reduction, or other expenses that could be put-off or skipped in case of an emergency. With an initial budget in place, you should have a pretty good idea of how much this is. Imagine you had an emergency and you lost your income for a month. How would your spending change? Which spending categories would you eliminate? Your STEF should only cover those expenses that you would still have in an emergency situation. My wife and I have debated if you should include only necessary expenses or all expenses. I truthfully don’t think it really matters that much. JUST START! Calculate only the necessities and save that amount first. Once you reach it, you can decide if you want to save enough to cover all expenses. Even a small or under-funded STEF can provide the benefits outlined above, so it’s most important just to start as soon as you can!

Ideally you should also have a long-term emergency fund but it will take a lower priority. Other things, like paying off debt and saving a consistent amount for retirement, should take precedence over a long-term emergency fund. I will address the long-term emergency fund in a later post.

How to use a short-term emergency fund

Your STEF should reside in the main checking account you use to pay your bills and expenses. If you have multiple accounts from which you pay bills, split up the short-term emergency fund and put just the amount you need in each account to pay one month of expenses from that account. For example, we pay our mortgage from a separate checking account because we got a better rate on our mortgage. We ONLY pay the mortgage from this account so we placed an amount equal to the mortgage payment as a short-term emergency fund in that account. I hate that we were forced to use a separate account because it’s a hassle to manage and keep track of, but if you have a similar situation at least you’ll know how to deal with it. Ideally you should pay all your bills from one account for the sake of simplicity.

Rules for managing your short-term emergency fund

There are a few rules you should follow in building up and managing your STEF.

1. Get a STEF in place as quickly as humanly possible.
2. The STEF is not a “blow” fund. ONLY spend it on emergencies!
3. When used, the STEF should be re-funded as quickly as possible.

Let’s cover each rule in more detail

1. Get a cushion in place as quickly as humanly possible

Do your best to save your STEF AS FAST AS YOU CAN. Using cash for your out-of-control categories will hopefully result in some extra savings which you can divert to the STEF. I would even temporarily divert other long-term savings, assuming they are easy to re-direct and wouldn’t require extensive paperwork. With enough focus, many people can save a full four weeks of expenses within 2-3 months.

2. The STEF is not a “blow” fund. ONLY spend it on emergencies!

The STEF is NOT a blow fund or a cushion used for month-to-month budget errors and oversights. The STEF should be used ONLY for emergencies. If you’re self-employed the STEF may also be used to cover your expenses if you have an unexpected low-income month.

Emergencies might include:

• Not receiving expected income on time
• An unexpected period of unemployment or under-employment
• A Car breaking down
• Unexpected illnesses or injuries
• Travel expenses due to a funeral
• Unexpected household expenses (the fridge or air-conditioner break)
• Traffic tickets (ok, my wife might disagree with this one)
• An unexpected tax burden (this should ideally be avoided with good planning but…things happen)

Emergencies DO NOT include:

• Planned car maintenance
• Expected or small medical expenses
• Vacations
• Birthdays
• Christmas
• Clothing
• School supplies
• Unexpected expenses under $100 that should be covered by your monthly “cushion” budget category

Is it an emergency?

Some scenarios may walk the line between an emergency and a planned expense. For example, you know your car will probably break down at some point but it’s very difficult to predict WHEN and HOW MUCH it will cost. How you deal with this is up to you. You may want to start a “car replacement” or “car repair” budget category. Or you may decide to rely on the STEF when your car breaks down. I like having a “car repair” budget category that can be used to purchase a new car if I don’t have any major repair costs.

Create an “Emergency Rules” list

Creating an “Emergency Rules” list will help you decide ahead of time what you consider to be an emergency. Think about some of the “gray area” expenses and decide how you will react. You can use the lists above as a starting point. An “emergency rules” list helps you prevent deciding in the moment and calling something an emergency expense that shouldn’t be. If you are married, the list will be an argument-prevention device. You can negotiate while you’re calm and collected instead of waiting until an emergency occurs and you’re both stressed out. My wife and I have used our list many times and continue to revise and refine it every few months.

3. When used, the STEF should be re-funded as quickly as possible.

The last rule for your STEF is that, when used, it must be re-funded as quickly as possible. One danger is that you’ll use the STEF as an excuse to spend irresponsibly or unco\nsciously. If you spend more than you planned in a month it’s easy to say, “it’s ok, we have enough money in our account.” Before your know it, the STEF is depleted and you’re back at square one. To prevent this you must religiously account for your STEF every month. If you use it, replenish it as soon as possible. Because emergencies are typically large expenses, it may take a few months to fully replenish the emergency fund. But at least it will have prevented you from going into debt.

Start Today!

As I mentioned, even a small, under-funded short-term emergency fund can provide you significant benefits. The sooner your start building your STEF, the sooner you can lower your stress and smooth out your financial journey. Please leave a comment with your thoughts. If you have a short-term emergency fund already, share your experiences.

Be sure to TELL A FRIEND about GFD! I want to help as many as I can to obtain stress-free financial control and meet their financial goals.

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• 3 reasons most budgets don’t work and how to fix them (a.k.a. How to create a budget that works)
• How to create a zero-based budget
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In my last post, I covered why most budgets don’t work and how to fix them. One of the ways to make your budget work is to create a zero-based budget. Today’s post outlines how to create your first zero-based budget. Over the next few weeks I’ll be addressing various aspects of creating and managing a budget. Let’s start with the basics. Some of these steps may seem obvious or simplistic. But for those who just can’t seem to get a budget started, I hope to give you some step-by-step detail that will help make creating a budget easier.

What is a zero-based budget?

A zero-based budget is one where your total income minus your total expenses equals $0. In other words, it forces you to assign every dollar of income to an expense (or savings) category. As Dave Ramsey puts it, you’ll be “spending your month’s income on paper” before you spend it in real life.

Benefits of a zero-based budget

Using a zero-based budget and properly dealing with the difference from month to month will allow you to gain total control over every dollar you spend. If you get a bonus or spend less than you planned during the month, you can easily redirect that money where you really want it instead of letting it dissipate through unfocused spending.

A word about spreadsheets

I highly recommend using a spreadsheet to do your initial budget because it’s very easy to calculate amounts and rearrange the order of items. If you don’t have Excel, you can download the free Open Office CALC spreadsheet software or use a free online spreadsheet like Google Spreadsheets or NumSum.com. Simply using paper and pen is ok too. If you do, you may need to re-write it a couple of times and be sure to double check your calculations.

When first starting your budget I would NOT use the budgeting tools in Quicken, MS Money or other automated tools. You may be able to use those tools effectively once you have a solid hold on your budget, but for now it’s best to make your budget by yourself so you know every nook and cranny. That way you’ll be less likely to make errors due to not understanding how an automated tool is built. You will also be more likely to use a budget if you create it yourself. Once you have a high degree of confidence that your budget is working properly, feel free to experiment with pre-built tools and spreadsheets like pearbudget.com.

Preparation: Get out those statements

Before you get into the thick of things, you’ll want to do a little preparation by collecting the following:

• Pay stubs
• Records for other income such as bonuses, gifts, and tax returns
• Copies of your recurring bills
• If you track expenses in Quicken or MS Money, print out monthly reports of your expenses for the last few months
• If you use checks regularly, it may be useful to have your check register on hand

Agree to be civil

Now take a few deep breaths. If you are doing this with a spouse, agree to be civil. Ask yourself “how can I do this and enjoy it?” As you go through the initial steps of allocating, don’t nit-pick too much. If one person wants to budget funds for a category and the other disagrees, let them budget the funds and you can go back later and adjust once you know if you’re over and by how much.

If things tend to get heated, I also recommend setting a time limit for your budgeting. My wife and I tend to do well in chunks of about 30 minutes. Once we go over that, I start to get grouchy. It’s ok to do this a little at a time. If you schedule 30 minutes a night for several days, you should be able to get through everything.

Step #1: Write down all your sources of income for the month

Let’s get started. If you have a fixed paycheck once or twice a month, this step will be easy. Just write down how much you make every month. If your finances are really tight, you should do a budget for each paycheck to ensure you have the funds on hand to pay bills that occur in that time period.

If you are self employed or have an irregular source of income, you’ll want to wait until you get an actual check and then follow this process for just that check. In the meantime, you can follow this process for the money you have available in your bank account. Just use your balance as the income. For example, if your bank account balance is currently $3,000 then put that amount as your income. As we go through this process you’ll be allocating how you’ll use that $3,000 until your next paycheck.

Do I put down net or gross income?

It really doesn’t matter if you put down net or gross. If you use gross (the amount before taxes, insurance, etc that are automatically deducted from your paycheck) you need to be sure to include the categories and amounts that are automatically deducted from your paycheck in your budget. I prefer using net so that I don’t need to write the extra expenses down every month. Because taxes and insurance are the same from month to month I prefer to simply check the amounts every quarter or so to make sure everything is still the same. It’s more efficient to track them separately.

Of course, if you’re self employed, be sure to allocate for paying taxes.

Step #2: Write down a list of expenses

Write down a list of all the expenses you expect to have this month. I’ve included a list of possible expenses below to prompt your memory. Be sure to include expenses unique to only this month. Do you have a friend or family birthday? Is your registration due? This step may actually unearth some expenses that you forgot about. If you think of expenses that are coming up but not in this month, that’s ok, just go ahead and write them down and we’ll deal with them a little later.

• Income
• Paycheck 1
• Paycheck 2
• Other Income 1
• Other Income 2
• Expenses
• Taxes (if using gross income or you are self employed)
• Mortgage Payment
• Second Mortgage payment
• Household (yard)
• Utilities: Gas
• Utilities: Elect/Water/ Gar
• Auto: Gas
• Auto: Insurance
• Auto: Maintenance
• Auto: Registration
• Satellite TV
• Life Insurance
• Debt reduction
• Babysitting
• Clothing
• Grocery
• Grocery: Eat Out
• Grocery: Eat Out
• Grocery: Nonfood
• Medical
• Hair cut/personal care items
• Charitable Donations
• Emergency Fund
• New car savings
• College Fund
• Dry Cleaning
• Gifts: Birthdays
• Gifts: Christmas
• Gifts: Holidays and Other
• Household: Maintenance
• Retirement Savings
• Magazine Subscriptions
• Entertainment: Dates
• Entertainment: Video rentals
• Personal money (1 for each individual)
• Cushion

You’ll probably miss an expense or two at first and find yourself part way through the month saying “shoot, I forgot to budget for that.” To address this scenario, be sure to budget a “cushion” account (last week I called it a “grease” account, but I think cushion is simply more understandable and descriptive, so I’ll stick to that). I recommend starting at about $100 at first. Over time, you’ll be able to get a feel if this is too much or not enough.

Include savings and debt reduction in expenses

When I say “expenses,” I really mean “funds that will be spent or allocated to other purposes.” Saying “expenses” is just so much easier. Include any savings allocations, debt reduction payments, or any other monetary outflows in your expense list.

Step #3: Identify your expense types

For this step, simply go through all the expense categories and mark if they are fixed, semi-fixed, or variable. Just write an “f,”"s-f,” or “v” next to the category (or in another column if using a spreadsheet). Fixed expenses are those that don’t change from month to month like your cable bill. Semi-fixed expenses are those that may vary slightly from month to month like a phone bill. As a rule of thumb, semi-fixed expenses shouldn’t vary more than $10 in a month. Variable expenses are those that vary from month to month more than $10 like groceries or gas expenses.

Step #4: Allocate your fixed and semi-fixed expenses first

The reason we marked each expense type was to determine the order to allocate them in. First allocate your fixed and semi-fixed expenses. I recommend doing this simply because it’s easy. Your fixed expenses will probably include your largest expenses, such as your mortgage, so it will be easier to deal with the smaller amount left over. Plus, most of your fixed expenses are probably not very negotiable without dramatic lifestyle changes or disruptions so they give you a sort of “hard landscape” around which you will fill in the variable expenses.

Once we are done allocating all our expenses, we’ll circle back and see if we want to eliminate one or more of the fixed expenses. For now though, allocate them all.

Average out your semi-fixed expenses

For your semi-fixed expenses you’ll have to average out how much you’ve spent over the last 3-4 months. No need to get too crazy or precise as long as your in the ball park. You’ll be wrong anyway.

How to deal with periodic expenses

There will be many expenses that won’t occur this month but that you will need to save for like car registrations, birthday and Christmas gifts, and some insurance payments. To ensure you have enough money when the time comes you need to start saving that money now.

Most people just divide these expenses by 12 and save that amount each month. DON’T TAKE THIS APPROACH WHEN STARTING A BUDGET. You will end up short unless that expense is a full year away. Instead you need to take each expense, count how many months away it is, and divide the total payment amount by the number of months. For example, if I have a car registration payment of $100 due in four months, I will divide $100 by 4. That means I should budget $25 a month to save towards the registration. As soon as I pay the registration, I can then divide the next registration payment by 12 and save little by little for next year.

This approach may cause a little strain on your budget at first because you will need to be saving a larger amount each month for the expenses coming up in the short-term. However, once you make the payment, your monthly allocation will go down for that category freeing up extra cash that you can redirect wherever you want.

There is one other approach I should mention. My wife and I find that we will fairly consistently receive “windfall” money two or three times a year in the form of bonuses, gifts, or tax returns. Occasionally we will budget portions of the windfall to periodic expenses so we don’t have to worry about saving from month to month. The only problem with this approach is that if you don’t have enough windfalls, you could end up having a periodic expense and not enough money to pay it.

Step #5: Allocate your variable expenses.

Now that you’ve gotten a good chunk of your income out of the way, it’s time to deal with what’s left (hopefully it isn’t depressingly little). So far we haven’t worried about calculating income minus expenses. If you want to, you can do a quick calculation at this point so you know how much left over you’re dealing with. Or you can just speed through and budget your variable expenses and do a mass calculation at the end.

Try not to scrimp too much on your necessity categories like food, clothing, and transportation/gas. Most people underestimate these categories.

Personal money

I highly recommend allocating personal money for each spouse. Having your own money to spend however you want is crucial to making a budget work. Even if you can only afford to budget $10 or $20 dollars, it will help your budget feel more manageable.

Step #6: Calculate the difference between income and expenses.

Ahhh, the moment of truth. Subtract your total expenses from your total income. This is where a spreadsheet comes in handy. You might want to be sitting down when you do this.

Step #7: Adjust your categories until income = expenses

Now comes the hard part. You need to adjust your categories until your income equals your expenses. This is where you will need to make some trade-offs between one category and another. This step is usually where the most conflict occurs between couples because it exposes their conflicting values. If things get too heated, it’s probably better to take a break and continue later. Just remember that this is your first budget and you will refine things as you go. You don’t have to feel locked in to the decisions you make now.

What to do with a positive difference

If you’re in this situation, congratulations! Now you just have to allocate the remaining money. The whole point of a zero-based budget is that you need to ALLOCATE EVERYTHING. That way the remainder won’t just disappear through unconscious spending. The good news is you can allocate it any way you want. If you are going to allocate it as money to blow, that’s fine as long as you consciously do so. Some other suggestions for allocating this money include:

• Pay down debt
• Save for retirement or your children’s college
• Save for larger purchases like vehicles or furniture
• Save for a vacation

What to do with a negative difference

I’m guessing that the vast majority of people will have allocated more expenses than they have income resulting in a negative difference. Don’t be discouraged! The first time we did this, reality hit us hard. We had to do a major evaluation of our priorities and really distinguish between our wants and needs.

For many families this process will expose that they have been spending more than they make and can’t support their current lifestyle on existing income. It can be extremely hard to realize that lifestyle changes are in order, but at least you now know the truth and can fix your problem instead of going into more debt.

Here are some suggestions for adjusting your budget:

1. Identify all your non-necessities. Yes, cable is a non-necessity.
2. Each spouse should rank the non-necessities in terms of importance to them
3. Eliminate or reduce those that both spouses agree are a low priority

Hopefully by eliminating or lowering the easier “consensus” items you will now be at a zero balance. If not, you will have to negotiate which categories are most important to each of you. You may have to make a lifestyle change by either earning more income or lowering your cost of living. In some cases, moving to a less expensive place may be in order. Housing is usually the largest expense and can make the biggest difference to your expenses. Not long ago, my wife and I almost had to move in order to live within our means because we had a bad year with some unexpected medical expenses. That is what prompted us to really take control of our finances. If we hadn’t got on a budget, we would have had to move to a less expensive home.

Step #8: Print out your final budget

I strongly recommend you print out your final budget and put it in a binder. This gives you a hard-copy record of your decisions. The problem with keeping only an electronic version is that you sometimes can’t be sure if it’s been changed from the original. Printing a copy allows you to put a stake in the ground for your decisions up to that point. It will also be useful when reconciling at the end of the month and planning next month’s budget.

Next steps

Congratulations! You’ve now completed your first zero-based budget. Now that you have a budget in place you will need to execute your plan and follow up at the end of the month to deal with what you actually spent. Over the next few weeks, I will be covering some ways to make tracking your spending and reconciling your budget much easier. The first month you use a budget, review it as often as you need to stay on track. Take a few moments each day to review your spending if necessary. I recommend reviewing your progress at least each week at first. Once you get your budget down, and with a few tips and tricks, you’ll be able to stay on track with a single monthly review.

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