Living with a Budget is Not Living on a Budget

I was thinking about writing something about budgeting your expenses and managing money for a while now, but I was never too sure about what to write about and I don’t want to give out suggestions that won’t really work. This specific kind of money managing works for me and has been the case for almost a year now. I went from maxing out on my credit card to being able to have holidays whenever time allows. Granted, I live alone and have virtually no one to take care of but my two dogs.

The basic idea is mixing the 43-folder system to your money management. Change from living on your credit card to living on cash. Live on daily allowance for your meals, budget and track all your expenses. I know at this point it sounds like a lot of work, but it’s not and if you have access to a computer, internet, you can do it.

At the start of the year, I plan my annual income and projected expenses. Allocate everything based on categories and items for each month. I personally use an excel sheet that I downloaded from this site to do this. You can always divide this annual budgeting by semester or quarters.

The next step is to lay out that entire budget every start of the month and see where you actually stand. Again, I used the excel sheet to do it. The website doesn’t have a template that incorporates the two sheets into one file, but you can easily do that on your own. The template lets you see how much projected income you put in and how much you are actually making and does the same to the other items and categories of expenses.

Now here comes the tricky part. I live day by day on an allowance. I give myself an allowance enough for one decent lunch at work. And what I meant with decent lunch is not the vending machine. You need to figure out how much allowance you are going to give yourself. I plan out everything else outside of that. The principle is that the allowance is my money that I can choose to use as I see fit for that day only. So if you plan on giving yourself $3 a day, that $3 is yours to use for that day. It depends on you whether or not you are going to use all of it or just part of it.

After I figured out how much money is going to which line, I take out a calendar and plan when I’m suppose to pay them. I usually pay my credit card debt, rent and all of that as soon as I got my paycheck. Calculate all the other spendings you are planning for the month apart from all the monthly ones and cash it. Divide them according to your daily budget and put them in your daily 43-folders (in my case, I use envelopes numbered 1 to 31 corresponding to the dates).

Everyday before I go to work, I take out the money form that day’s envelope. That way I have money in my pocket everyday, and I never miss out another due payment.