I often hear people say that budgets don’t work, just as diets don’t work. But, speaking as a middle-aged white lady, everything we have been told about diets is a lie.
With a budget, you don’t have your metabolism working against you.
Because my income is highly variable, I need a system to make sure that the bills get paid no matter what I make. I use a version of the very old-fashioned envelope system. It’s a great way to start. The original version called for getting your paycheck in cash and then dividing the money into envelopes, one for each different budget item. Then, you would only spend each envelope on each item. If there was $40 in the grocery envelope, then you could only spend $40 on groceries.
I use a spreadsheet with each fixed budget item in a line for each month: mortgage, gas, electric, etc. These have to be paid no matter how much money comes in. When I get an assignment, I put in the expected income from that. At the same time, I set aside money for taxes, retirement savings, business expenses, and charitable contributions. These vary with income.
Most of the ongoing bills are paid through direct transfer, and I use cash for almost everything else. If I have cash left at the end of the week, I divide it among envelopes labelled for clothes, vacation spending, family parties, etc.
The budget items go out for a last six months, to cover the next two estimated tax periods. This system is a bit conservative – it always looks like I’m losing money – but it has keep my family on track for the last several years.
If you are earning a set salary, the budgeting will be easier. Dave Ramsey has a good guide to getting started.
And budgeting is much easier than a diet. Seriously.
(This is cross-posted on Chicago on the Cheap.)
