Monday, February 8, 2010


    Starting in November of 2008 I took over the budget from Dalynn.  For most of our marriage Dalynn and I have passed the budget back and forth.  It would work like this:  I would see Dalynn get stressed about our finances, attempt to take them over, bounce a few checks or make a few payments late, then hand them back to her to salvage.  This happened many times, probably around 5 or 6.

    The reasons that I've always struggled with money are myriad.  To begin with, I'm not a person that deals with self-inflicted pain well.  I always relish the idea of buckling down, but when I actually do buckle down, I don't enjoy it nearly as much.  As well, I never really learned how to handle money.  I grew up knowing that money had to be handled, just not how.  The last, and perhaps most important reason is that I'm impulsive.  I will go out and make a snap decision and the consequences be damned, I'm going to do what I want to do in spite of them!  Oh, and I can easily make an excuse that "just this once" won't hurt while I'm doing that...

    All of these factors have conspired throughout my life to make me terrible with money.  This time, though, I've been handling our finances for over a year, and doing well.  Here's how.

    First off, I had to find a system that worked for me.  Dalynn knows how to handle money, but her method of handling money is like a black art to me.  Ironically, the method that I've chosen to handle money is akin to a black art for her.  Neither of us thinks about money in quite the same way.  With that in mind, I decided I would find a way that made sense to me.

    I eventually found (or should I say re-found) the envelope system.  I've read about it over the years but I've always felt that surely I didn't need such a simplistic system!  Turns out I did, and I'm glad I finally humbled myself.

    The envelope system is easy.  It works like this:
    1. Start saving your receipts.  If you've never tracked your spending, you'll need to do this for about a month before you will have an idea what your spending habits look like.
    2. Using the receipts you've saved, create categories (or envelopes) based on how you spend your money.  Some examples would be things like fuel, groceries, dining out and savings.
    3. Take a ballpark figure of what your monthly income is and divide up that income into all of the categories you've created.  You can use your months worth of receipts to give you an idea of what you're spending on a given category.  Once your monthly income hits zero, stop funding and instead apportion money between the categories.
    4. When you get payed you put the money directly into the categories that you've created.  So, if you get payed twice a month, each paycheck you'll be filling each category with half of it's total value.
    5. When it comes time to spend money, you pull the money from the category which it belongs to.  If you're going to go out to eat, then you would pull the money from "dining out".  If you're going to go grocery shopping, then you pull the money from "groceries".
    6. When a category runs out of money you either stop buying things that fit in that category or you borrow from another category, but you can never make a category go negative.
    7. At regular intervals you assess whether or not a category is reasonable and move money around to reflect reality.
    I chose this system due to its simplicity.  It's easy to understand what I have to do when a category runs out.  I stop spending or find the money somewhere else.  If I maintain this discipline, I can never over-spend!

    I had two goals when I started budgeting:  get an iPhone and make sure we live within our means.  I have now accomplished both of those goals!  As a matter of fact, I was able to get my iPhone rather quickly.  Making sure we live within our means took a little more time, but probably not more than six months.

    The beauty of our budget became abundantly clear to me this past September.  Dalynn came home from a doctor's appointment for Ava and informed me that she was going to have to go on formula.  It wasn't just any formula, though.  It was the most expensive formula on the market!  It looked like Ava's formula was going to cost us about $250/month.

    I walked around for about a day wondering how we were going to do this.  Then, I turned to our budget (with many prayers, I might add).  In the span of about an hour, I found out that with a little trimming in some non-essential categories (like dining out and our miscellaneous category) we were well able to fund a new category specifically for Ava with $250/month.  By doing some other smart things, like shopping the formula on Amazon and being very careful about wasting it, we've been able to stretch the formula a lot farther than we initially thought.

    Our budget brought us peace.  There's no way we would have been able to figure out whether or not we could have afforded that kind of expense without it.  What's more, now that that money is out of our budget proper we've decided to keep it that way.  When Ava goes off of formula (which should be in the next month or so) we're going to keep that money separate and use it in August to send both boys to preschool.  There are many other benefits besides peace of mind, but that's a pretty awesome one.

    Now that we've made our budget work so that we are living within our means, we're attempting to tighten things down a little here and there so that we can do more with our money.