Tuesday, April 29, 2014

Episode 4: The Process

Now that you've established what types of accounts you want to budget for, AND after you've done all the calculations to figure out just how much to deposit into them each time you get paid - it's time to actually put everything into motion.

I set aside time to balance the check book, pay bills and attend to my budget binder every week.  It may seem crazy but I spend about 1 hour (give or take a few minutes, depending on interruptions and my amount of focus) each week making sure that things in our budget are running smoothly.

Here's my process:

1.  Gather ALL receipts to write every transaction down in both the budget binder and the master check book register.  You're already tilting your head to the side and thinking "huh?".  As I've said before, we have one checking account and our budget binder is what separates each individual "account".  We don't actually have 20 separate checking accounts for each one, we just have a binder designed so we can budget for separate accounts.  I am aware that some people constantly check their accounts online to make sure everything looks good - we do that from time to time as well...but we also receive a statement each month that I go through and cross check every last transaction.  Sounds tedious, right?  It is.  But, it makes us accountable for every last penny we bring in and spend.

We have this plastic envelope that we put our receipts in.  That way, none of them get lost or misplaced.  It's easy to empty out your wallet, purse, or pockets and put the receipts in one location so they're easy to find and grab.  I purchased this at TCS for $1.29 - worth it.  Oh, and of course a little Washi and label maker added a little spunk!

2.  I head down to my little area in the basement and get comfy.  I'm going to be here for a while.  BUT, I have to brag a little here.  Last week I received some pretty amazing gifts from some pretty amazing people. I finally have something on my desk that makes me smile every time I see it.  What more could I ask for?  Washi tape, a book ABOUT Washi tape, my FAVORITE pens, a little book for my thoughts and a beautiful blue bird to bring in some color!!!

I want to put some flowers in the little IKEA flower pot, but just haven't yet.  I just love looking at it!  Makes me happy.  Yay!   Thank you so much L, S & T!!!

3.  Write every last receipt/transaction into the account it belongs in (gas station receipt goes into the 'Fuel' account, grocery store receipt goes into the 'Groceries' account, etc.):
Remember these large check registers that I have for my budget binder?  This is where I write down every transaction, both withdraws and deposits.  Balance each account when doing this;  meaning, do all the addition and subtraction to each account to get down to your final total.

4.  You must remember to write down every last receipt/transaction into your master check register as well.  It's a redundant process, but it will make sense when I get down to the end of the process. 

5.  Now that you've written down ALL of your receipts, it's time for you to pay bills if needed.  This is where you can do an online payment, if you have an automatic payment withdrawn from your account - write it down, or if you need to write a check to pay a bill.  Whichever way you choose to do it, make sure to write it down in both your budget binder account AND your master check book.  Balance the accounts. Repetitive?  I know.  Stay with me.

6.  Time to deposit money.  If it's a pay day, it's time to deposit money into each account you've designed in your budget binder.  For some people, it may be every week that you'd deposit money, some people it's every other week, for some, once a month - whatever you've come up with. Balance the accounts. Remember to write down your pay check into your master check book as well...double duty!!!

7.  So, by now, you've: 
  • Written every receipt/transaction down in both budget binder and master check register.
  • Paid all bills that are due.
  • Deposited money into each account in your budget binder.
  • Written down your pay check into your master check register
  • Make sure to balance each account as you're going along.  You treat each account like a check book register!!!  You want to see what the total amount in each account is.
8.  Now that you've got every account, including the master checking account, balanced - it's time to do a little more math.  Like I said in the last Episode, saving money was one of my main goals.  Here's where that all comes together.  In our budget binder, I came up with our individual accounts both the "need" accounts (bills the MUST be paid) and the "important" accounts (accounts that you want to budget for).  When figuring how much needed to be in each account, I also tried to keep in mind that I wanted to save money in the long run.  So, I calculated our accounts with the idea to live on the LEAST amount of money possible.   

Example:  We have a 'Gift' account.  While I adore buying others gifts, I also know I can do it on a budget and still give a pretty stellar gift.  So instead of depositing $25 each pay check, we put $20 in each pay check.  You're thinking, "How is decreasing it by $5 going to save you money?"...add that up and in a year alone that's $130 in savings.  Never live ABOVE your means, try and live below them.  I'm not saying you have to wear holes in your socks because you want to save money!!!  I'm saying, if you're looking to save, shave a little off of your accounts to put more where you want it.

Back to "it's time to do a little more math":  Everything is balanced now, your budget binder and your master checking account.  Since everything in your master checking account has been balanced, you already have a total in there.  Now, in theory, your budget binder total SHOULD MATCH what's in your master checking account.  BUT, if you've shaved a little off your budget binder accounts here and there, come pay day, you will have MORE in your master checking account than in your budget binder.  You always want both the budget binder and the master checking account to match in their totals!!!  The way you find out the total in your budget binder is add up every account totals after you do all the balancing. 

Example:   Groceries = $172.50
                 Mortgage = $500
                 Fuel = $98.63
                 Gifts = $71.98
                 Insurance = $244.59
                 TOTAL = $1087.70 in your budget binder

Here's an example of what it should look like if you're shaving a little here and there in your budget binder or if you've designed it to put extra in savings.  Or, if you've worked overtime, a holiday or received a bonus at work - any kind of money that you don't PLAN on receiving in your pay check.  It's simple subtraction.

Example:   Master Check Register Total = $1423.97
                          - Budget Binder Total =  $1087.70

Now, that you have the difference between the master account and the budget binder, which is $336.27, you can put it directly into your savings account (or anywhere else you want to put it)!!!  Point is, that's the money you can put away.  By budgeting on less, you save more.  
Gah!!!  That's me taking a breath after typing all this out!!!   Until Friday!

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