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Through years of trial and error, falling off the horse and
getting back on again, Natalie and I have developed a budget system that works
for us. We know that each family requires their own systems to fit their own
specific needs, and this is not a one-size-fits-all. But we hope you are able
to glean some good tips and craft a budget system that’s a perfect fit for your
own family!

We currently use a combination of tools to stay within our budget. Our three tools are:

– Excel spreadsheets

 – Cash
budgeting

– Online transaction tracking

 It might sound a little complicated
at first, but today I am going to explain just how we use these tools…

1. Our Excel Spreadsheets

This is where my inner geek shines through. I love Excel
spreadsheets, but I realize that most of you probably don’t share that love (if you don’t like Excel, you could probably find an alternative). This component is vital to our budgeting and
financial management.

We use spreadsheets to predict our upcoming spending for the month, and then to
track our actual spending at the end of the month. It allows us to sit down
together, look at our anticipated income, list out bills, extra expenses, and
savings goals… and see if it all adds up. If not, we can do some tweaking and
adjusting so that we know we won’t be spending more than we are bringing in.

Here are the categories we use for our budget spreadsheets:

1. Income

2. Bills

3. Cash budget

4. Extras

5. Savings goals

6.Net Income (should be greater than 0) = Income –
bills – cash budget – extras – savings

I’m able to create functions in Excel to do the math for me
and make it very easy – just plug and play. But those of you who aren’t so
inclined could just do the math by hand in a budgeting notebook.

Please note that our Excel file and budget change from month to month. We know what our basic expenses are each month, but we have a bit of wiggle room to adjust categories in anticipation of additional expenses.

2. Our Cash Budget

We used to do a cash budget for almost everything, but we’ve
moved away from that. Now we only do the cash budget system for categories
that we are likely to overspend and we need a hard limit on.

The categories we use the cash budget system for are:

1. Groceries

2. Home supplies

3. Allowance

4. Date night

5. Gifts

For these categories we choose a set amount at the beginning
of the month and withdraw the money in cash from the bank. The money then gets
divided out into envelopes (Natalie uses her miss moneybags wallet specifically for this), and
whenever we spend on that certain category we’ll use the cash out of the
envelope. We can visually see the money decreasing in the envelopes, and when
the cash is gone we know we’ve met our budget limit—without any guessing or
adding up receipts.

The allowance category may sound silly, but it has actually
been very important and healthy for Natalie and me. This allows us each to have our
own spending money to use on whatever we want without having to talk to the
other person about it. Coffee dates, books, beer… whatever. And we each get the
same amount, so it’s fair.

You may get to the point when you don’t need to do the cash
system for a category anymore and can just regulate the amount you put on a
credit or debit card. That’s fine. Natalie has gotten to the point where she
knows how much she can spend at the grocery store (and will actually add up the
total price as she puts items into her cart), so we have recently moved away
from doing the cash system for groceries and are now tracking online.

3. Online Transaction Tracking

This sounds complicated, but it simply refers to checking the
bank account online or using an app to track purchases. We use Mint.com for
this because it is free and user-friendly. Also, Mint has apps for smart phones and tablets, so you can use the
service on multiple platforms. I have come to love their iPad app.

Online Transaction tracking allows us to track our spending in the categories we
set in our budget spreadsheet that we use our debit card on. I try to get on
the computer and categorize our transactions at least twice a month to stay on
top of where we are with the budget. Mint will
actually show you in real time your current spending compared to your budget
limit, and send you text messages when you’ve overspent. Some people solely use
this kind of app for their budgeting, but it works better for us to do a hybrid
approach.

So the role Mint plays for us is to allow us to accurately
tally up our spending at the end of the month and compare it to our goals we
set at the beginning of the month. If we overspent on a category like clothing, we
may have under spent in a category like pet supplies to compensate, or we may
have to take out of our savings goals (worst case scenario).

In summary our budget system allow us to:

1. Make accurate predictions on anticipated
spending for the upcoming month to ensure we are not living beyond our means

2. Stay on track during the month so that we are
staying within the limitations we have set for ourselves

3. Set savings goals and follow through with those
goals by depositing money into savings at the end of the month

4. Minimize stress by giving us the assurance that
we can meet our needs and put back money for the future

We hope you’re able to glean something from learning about
how we budget. The most important thing is to understanding that a budget is
there to serve you and give you the freedom to live without financial stress,
by allowing you to live within your means and plan for the future.

– Luke

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i’d love to read any tips or tools you use when budgeting your home finances!