What is Budgeting?

Budgeting can be defined as putting your money in different places to help pay off a debt or save for something special. Dave Ramsey states ” every dollar should have a purpose.” For example, knowing that $10 went to groceries and $5 was spent on food is definitely not an easy task. Well… I learned that the hard way!

As I started to open the envelopes to all of my hills and write the total minimum payment as well as the balance of these enormous bills on a piece of paper, I realized I need to come up with a plan. I thought to myself, “How in the world am I going to budget?” I have never done that in my life. All of these credit card bills and collectors wanted my monthly payment, and I knew I had to give it to them but with what money? The first thing I did was take a deep breath. “Okay, you can do this.” Then I opened my bank account app on my phone, to see how much was in my checking account. Once I knew that amount it was time to take the plunge.

I picked up the pile of bills and put them in order from smallest to largest. I opened a spreadsheet application on my laptop and as I took the first bill off of the kitchen table and it was a total amount of $10,000.31 (maxed out) with a minimum payment of $147.00. I knew if I just provided them the minimum payment each month, it would take 18 years to pay it off. NO WAY!

In the spreadsheet application on my computer, I made four columns. Name of Bill, Minimum Payment, How Much To Save Each week? and Total Due.

In the first column, I started listing the name of each bill. The name of my first bill was Capital One. I listed that under the column bills as CC1. Then I wrote down my next credit card as CC2, and so on.

After I listed the names of my bills, I continued to the next column. I added each of the minimum payments. Boy, were they a lot! I moved to the last column of total due and wrote the exact amount I owed for the bill. For example, my first credit card was a total of $10,000.31. I was so scared to face reality, but this change was going to be for the better. Now you are probably asking why did I skip the “How much to Save Each Week” section? I am getting there; I know you are excited. After I took a step back and looked long and hard at this spreadsheet and budget that was about to change my life. This was getting good, and I was going to figure this out and become debt free!

Now to the “How Much to Save Each week? section. You are probably thinking, what am I even supposed to do here? This is the section that really helped me budget the most. In the beginning I was getting paid weekly, so it was easy to divide the minimum payment by 4, to figure out what to save each week. In my spreadsheet, I took my first credit card and saw that the minimum payment was $147. I took my phone and divided $147 by 4 and received $36.75. I knew that was the least amount I needed to save for each week just to pay the minimum payment. If I were to save $40 or even $37 to make my numbers more rounded it would be a lot easier. For this one I rounded it to $40. I knew each week, I needed to save $40 to pay the minimum payment and a little extra for the CC1 bill.

Then I moved to the next bill, CC2. I calculated that the minimum payment on that was $275.  I took $275 and divided that by 4 and that came out to be $68.75. I rounded that $70. Each week I decided I was going to take that money and put it aside for that bill. Note: If you get paid every two weeks, just take the minimum payment amount and divide it by 2. That will be the amount you have to save every two weeks.

In order for me to pay these disgusting debts off faster, I wanted to take my paycheck out each week and use that to put the cash in the envelopes to save . Now in order to do that, all I did was go to the bank and let them know I wanted to take my paycheck out for the week. I left the minimum amount that was allowed in my checking account so I wouldn’t go under the threshold. I asked the teller for 50-1’s, 2-100’s, 2-50’s and the rest in $20’s, 10’s and $5’s. The reason why I did this was to have a variety of bills in order to have that exact amount to out in the envelope each week. I decided to use cash because it is tangible and when I had nothing left, I couldn’t spend anymore no matter how bad I wanted it.

When it was time to pay the bill, I took that amount that is saved in the envelope, and I bring the cash to the bank and deposit it into my bank account. It’s that easy!

You are also probably asking envelopes? Where do I get these envelopes from? Well, when I first started, I used the cheap white envelopes that you buy at the dollar store. Now I create my own and I label them with vinyl. You can find them on my Etsy shop: www.fortierfamilybudgets.etsy.com.  I can customize them for you depending on what the names of your bills are and such.

Now starting to budget can be difficult, but once you get started it is as easy as pie! If you have any questions, feel free to contact me and I will answer your questions. fortierfamilybudgets@gmail.com.