The following is a guest post from Stephanie, Smarten Up! Follow her on Twitter @stephkandray. You can also join in the Frugal Living Discussion “Cash Budget.”

We have been serious about a budget for about 5 years now, which is most of our marraige. We started by reading the book “The Total Money Makeover” by Dave Ramsey. We were introduced to the envelope system which is what we loosely base our budget on, though we use a virtual envelope rather than actual envelopes of cash. Now that we have lived on a budget, I cannot imagine living without one.

Michael and I were married while still in college so we have been tight on cash all the way through. I think this has helped to build a foundation for how we value money and live within our means. The only debt we have is student loans, but, belive me, its plenty of debt. We are committed to paying of this debt as best we can alongside paying our other bills and even saving when we can. Please understand that I am sharing more about our finances here than I do on a normal day and I hope that can be respected.

I will try and lay out the steps it takes to be successful in the world of budgeting, according to Stephanie Kandray, and hope you can make some sense of it.

Deciding to live on a budget

This may be one of the hardest steps there is. The idea of a budget, tracking and limiting your cash, amongst other things, is not appealing to many. As adults, I think we cherish the feeling of spending our money as we please, especially since many could not do so as a child. We probably thought, Why won’t my parents buy me this toy, I know they have enough money to do so. When I grow up I am going to buy my kids whatever they want. As an adult, most of us have come to realize this is not as good as it sounds. Maybe we did buy whatever we wanted, or even buy our kids whatever they want now, but realize this isn’t the best approach, or hopefully will soon realize this. So, if you are ready to budget your spending, give yourself a high five and please proceed to step 2.

Determining what to budget

Some of our budget categories include Giving, Student Loans and Phone Bill, just to name a few. This step can get tricky because you need to figure out what your expenses are every month. There will probably be some that you do not think to include but will pop up later and you will have to adjust accordingly. The best way to figure this out might be to track your spending for a month by looking at your bank statements, credit card statements, cash spent, and so on. It’s important not to forget things that may only come once every few months or annually like vehicle taxes. An emergency fund is also something to think about. This is another thing we learned from Dave Ramsey. Because we have studet loan debt, it does not make sense to have money sitting in savings at a smaller interest rate that what is accruing on our debt. Instead, he recommends having an emergency fund ($1000 to start, building up to 3 months pay). I have a complete list of the budget categories we have below to help you figure your budget out. Alright, you are ready for your next step!

Determining your budget amounts

If you are paid a salary where your paycheck is the same every time, this will give you a head start. If your paycheck changes slightly, its best to take the smallest amount it could be, to start. Now that I am no longer working I know that my husband gets paid two times per month, on the 15th and on the last day of the month. I call them 1st and 2nd paycheck. I know that he will get $x amount in those paychecks and have set our budget to meet that $x amount.

So, getting back to your bills. There will be bills that are the exact same every month, like your mortgage or rent and there will be bills that change every month like electricity or gas, depending on usage.

Did I mention this part will be a liitle challenging?

Don’t worry this will help you put your spending habits into perspective and make you feel more in control of your finances. Count how many paychecks you receive per month. For us, I know there are two because I am not making a paycheck. If you are married or in a joint household and two of you are bringing home paychecks, there might be 4 per month. When I was working I just labeled them Michael 1st and 2nd and Steph 1st and 2nd. Now, make a column for each paycheck and start with your consistent bills first. I know that my mortgage bill will be $x and is due on the 20th of every month. Michael’s 1st paycheck comes on the 15th so I will put mortgage under that column.

Here’s where the challenge comes in. Each column has the amount the paycheck is for, so you cannot have the expenses within that column total to more than the paycheck amount. I suggest doing this with a paper and pencil first because you will be doing a lot of switching around. (Hint: If you are having trouble evening out the columns to be the right amount of money, split some expenses up. Ex. You will be purchasing gas for your cars a few times per month so you might budget $75 from 1st paycheck and $95 from 2nd paycheck). This has probably been the most painstaking step for you, but I promise, it’s worth it. Now, relax…

Living your budget

Your budget is calculated, everything fits, and you’re actually excited about your finances! [Insert discipline here] Living your budget means living within your means and this might be a new concept for some of you. It’s mostly self-explanatory, but let’s just make sure you get it. If you have budgeted $75 this month for eating out, than that’s all you get.

This might require you to pass up an invite for a double date if your fund is already depleted that month and that will leave you with 3 options. {1} You can politely tell your friends the truth, that you’re on a budget and this meal is not going to make it into the budget for this month but can we reschedule for next week, when we’re into our next month’s pay? {2} You can look at your other funds to see if there is some extra money. Warning: You must be extrememly careful when you do this. An example might be: We have enough groceries to last until the next pay check in the grocerie fund and there is still twenty bucks leftover. I am totally fine with you taking from one to another here and there, but don’t make this a habit because it can come back and hurt you later. {3} You can ignore your budget, have a good time and figure it out later. I’ve done this before and it throws everything off. It’s not worth messing up your budget for.

Another dilema might be with your fluxuating bills. Your electricity bill might be low in October as you havent had to use the A/C or heat much. Well, come December with the Christmas lights and heat at its highest, you will see a spike in the bill. If you can afford to, set your budget to what it will be at its highest and do what you want with the extra money on low usage months. You can also find the average monthly cost and put that much into your budget every month. In months like October, you will have extra money that will cover for months like December when the bill will be higher than the average. Now you’re getting the hang of things!

What if’s

So your paycheck is different every month, what should you do? Like I said, set the budget for the minimum amount you will make. From there you can decide what you want to do with the extra money you might get. You can add it to a fund that is paying off debt (what I recommend) or to maybe your gas fund if you know you have to travel a little more than normal next month, or whatever you want to do with it. So your paycheck is smaller than your expenses. You have set your budget for the minimum amount of pay but there was an unpaid day off you couldn’t help. Well, you’re just going to have to make it work. You might have to cut a little from your grocery fund and not buy as many snacks, or cut from your eating out fund and eat out less. Whatever is in that expense column for that paycheck, you can make it work.

Keeping track of your budget

This part can be a little time consuming, depending on your method. If you are old-fashioned and like to pay for everything with cash, then go with the Dave Ramsey envelope system. Make an envelope for each fund and distribute the cash within those envelopes. If your envelope is empty, then you will have to wait until next month. I buys things online so this doesnt work for me.

The only fund I use cash for is my groceries.(This requires me to make a list, guestimate the cost of the items on the list and only have as much on the list as I have cash to pay for it). I created “virtual envelopes” using a ledger. There is software out there to manage your money, but I have just been using Microsoft Excell Spreadsheets. I use one speadsheet per fund and keep track using colums like date, add, subtract and balance. This way I can go back look at entries from the past if necessary.

I will be happy to respond to any questions or comments you might have. Below is the funds that we have for our family to help give you an idea:

• Giving (supporting our missionary friends, giving to church or other charities)
• Adah (for diapers, wipes, etc)
• Electricity
• Car Insurance
• Cell Phones
• Internet
• Eating Out
• Trips (car or plane trips to visit family out of state)
• House (things to improve house like candles or a lamp)
• Gas (for our cars)
• Medical (co-pays or other expenses insurance doesnt cover)
• Clothing
• Blow (money my husband and i get to spend on whatever we want, no questions asked)
• Toiletries
• Teddy (our dog, to pay for food, etc)
• Christmas (we save year round for Christmas presents)
• Renter’s Insurance (we are renting our house)
• Cleaning Products
• Health Insurance (I have individual)
• Student Loan Repayment
• Rent
• Gifts
• Car Maintenance (oils changes, fixing breaks, etc)
• Entertainment (netflix, out to movies, buying books, etc.)
• Emergency Fund

Stephanie is a stay-at-home mom who is currently blogging a few times per week on her website Smarten Up! where she is on a quest to regain knowledge she once had. She is married to her college sweetheart Michael and has a 1-year old daughter, Adah. She has a bachelor’s degree from Kentucky Christian University in Ministry Management (emphasis in camps) and Bible. She has worked with different programs and facilities, inside and out of ministry, with kids ranging from wee little ones through middle school. The most important thing she has learned through all of this is how she wants to raise her own children. “You can learn a lot of ways to NOT raise your children by working with other peoples kids.” Stephanie officially retired just before the birth of her daughter and does not plan on going back to working any time soon. While earning her bachelor’s degree someone asked Stephanie what she wanted to be and she replied with “a stay-at-home mom.” So, why did she get this degree? It was all part of the path that has been laid out for her. If you are wondering if there will be more children in the Kandray household, the answer is, most definitely, yes. When will that be? “Soon, we’re still practicing but game day is around the corner.”

Photo Credit: mynameisharsha