How to Budget
How to budget and everything else you want or need to know about budgeting
If giving is better than receiving, why doesn’t it feel like it?
Jesus himself said that it is, “more blessed to give than to receive.” I don’t know about you, but when I have been strapped for cash and needed to buy someone a birthday gift - it didn’t FEEL like much of a blessing.
I hated the feeling of being torn with what to do with my money. I wanted to be a generous giver, but when the $20 in my wallet was being pulled in 4 different directions, it made it difficult to be exceedingly generous like I wanted to be.
I am not sure where I got the idea from, but we had a very basic budget at the time and decided to create an ING account specifically for gifts and giving. This account was to be the source of all of our birthday and Christmas presents and any other giving we did.
I thought it was a good idea until we started doing it. Then I realized that it was an absolute GREAT idea and wish we had started it earlier. It instantly added so much more fun to the giving process, because the money was just sitting there waiting to be spent on others. It wasn’t getting pulled in numerous directions like it was previously. It’s purpose had been clearly defined.
Christians are called to give
We have the opportunity to give into God’s kingdom. We have the privilege of being able to give to help people. It really is a privilege and an opportunity. God doesn’t need us. He has an endless supply of finances - He can get the money where it needs to be. But He allows us the chance to be used by Him in the process, knowing that WE will benefit from being used.
As we get a better understanding of this truth, it helps us break free from our own selfishness.
God really wants to bless us!! He set the system up that it is kind of counter-intuitive - we give away, and as a result we get more. As we give, it is given back to us in a greater measure. The Bible makes it clear that there will always be seedtime and harvest. To the measure that we sow, we will reap.
Biblical giving
After we started to get an understanding about Biblical giving - we were faced with the same challenges that everyone else has. You want to give, but it is hard to find money to give, because it is all already being spent on other important things.
It was for this reason that we had to start budgeting for our giving. The Bible says that we are to “discipline ourselves for the purpose of godliness” and that “we should not make any provision for the flesh.”
It is crucial that we set up NATURAL processes and habits in order to fulfill the SPIRITUAL things that we are called to do.
In this case taking money right off the top of our income to budget for giving were the natural steps that helped fulfill what God wanted us to do. It wasn’t enough that we wanted to give, or even that we asked God to help us give. We had to take natural steps (that were His will) to fulfill what He wanted us to do.
Bottom Line: Budgeting for giving was just a simple step that helped us fulfill what we were called to do.
A few things that budgeting for gifts did for us:
- Assuming we were adding enough to the account, we rarely (if ever) would need to try to find money to purchase gifts.
- It encouraged more generosity because money was sitting in the account just waiting to be spent. We agreed that it would ONLY be used for giving purposes, therefore we might as well spend it because that was what it was there for.
- It is a wonderful feeling to have money available for the sole purpose of blessing others. It makes it really EASY and FUN to give.
- It is great to have cash always available to pay for Birthday gifts, but it is even more exciting as you increase your budgeted amount. When it gets to the point that there is so much money in the account that you have to start looking for people to bless. I want to get to the point where the account is overflowing and we have to work hard to try to give it all away!! I can’t think of anything more fun!!
Before we started budgeting for gifts I never had a thorough understanding of what Jesus meant that it was more blessed to give than to receive. The main reason was that giving created a negative side effect on my finances. Since my groceries and gifts were purchased from money in the same pot, I was always torn between my desire to give and my desire to eat.
Now, instead of thinking about how a gift was going to cause me to get fewer groceries, I now am free to focus on blessing the other person rather than my grocery list.
For more inspiration check out these giving verses
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What is the best way to start a budget?
The first thing that anyone who wants to make a budget must do is to compare their income versus their expenses. The good thing is that it is quite easy to do.
To get started you can download this free Excel budgeting spreadsheet which will help you calculate how much you spend each month and compare it to your current income.
It’s too bad most of us never learned this in school and had to figure it out on our own - so here is the lesson that we should have learned in 5th grade:
Expenses > Income = Bad Expenses < Income = Good
And honestly, as simple as it sounds, that is the key to wealth. Anyone, and I mean anyone, who IS wealthy (I emphasize IS because I am not talking about people who appear to be wealthy, but who are actually in debt up to their eyeballs) spends LESS money than they earn. AKA - their expenses are less than their income.
The great news about this is that anyone can do this - no matter what their income level. If you can do it on a small income, then you can do it on a large income. If you can’t do it on a small income, then you won’t be able to do it on a large one either. Trust me!
If you don’t believe me, just ask all of the lottery winners who went bankrupt within years of winning millions of dollars.
Back to making our budget…
Regardless of how your expenses and income compare right now - get excited, because you can easily change it!! If it is bad you can make it so much better!! If it is good, you can still make it even better!! I will show you how later, but for now…
Let’s make a budget!
Did you calculate what your monthly expenses and income were? Were your expenses less than your income? If so, you are a rare breed who is in great shape, so just sit tight for a minute.
For everyone else, whose expenses exceeded your income - you are not alone. You actually have a lot of company. The problem is that it isn’t good company! Most of our debt-ridden society is in the same boat, but you are one of the bold ones who is jumping out of the debt boat!!
So, if your income is $1000 and your expenses are $1200, that means you spend an extra $200 each month that YOU DON’T HAVE!! What your job is now is to find out what you can get rid of or quit buying each month to save that $200. If you have no idea where to start you can check out these money saving tips or browse other money saving ideas.
I know, I know - this is the part that hurts. Just like pruning a bush - cutting back hurts, but ultimately you are going to yield so MUCH more fruit because of it!!
The goal here is to get your expenses and income to AT LEAST be equal. Once that is accomplished we can work on eliminating wasteful spending or cut other costs to bring the expenses below the income.
Now that you have calculated what your monthly income and expenses are we can start designing our budget. We will first discuss the less effective, but easier method for budgeting…
The world’s easiest budget
There are 2 simple rules to do a simple budget:
- You can’t spend more than you earn - carrying a balance on a credit card is not allowed.
- Money must go to the budget categories as soon you get paid.
The way it works:
Rather than having 10-20 different categories of items to be budgeted for you only focus on the 1-3 most important ones and let the rest of the chips fall where they will.
So, to do this you take your paycheck of say $1000 and right off the top you put the money to your main priorities. For many people this is tithing to their church, retirement savings, college savings for children, etc…
A sample of this would be:
$1000 (paycheck)
-$100 (tithe)
-$100 (retirement savings)
= $800 (for the rest of the bills and everything else)
It is absolutely critical that the money gets taken out FIRST for these few budgeted items. If not, I can almost guarantee that the full amount will not make it as intended.
I highly recommend making this process automatic by using direct deposit or some other form of automatic withdrawal. There is just something about human nature that has a hard time staying consistent with things like this.
Why do you think the U.S. government takes our taxes directly out of our paycheck, rather than coming to collect the full sum at the end of the year? It is the same principle - use it to your advantage.
Easy budget, but not very efficient
I think this budget is perfect for people who don’t want to budget. It is simple, doesn’t take up much time, and will help you reach some savings goals. That said, it is still inefficient and leaves the door wide open for inefficient and foolish spending.
I think it should be considered the “lazy man’s budget” - and you are not LAZY, you are willing to work to get your finances in order!! I know this because you are still reading. So, since you are NOT lazy and are hungry for more of a challenge, let’s look at how the pros budget.
The money saving budgeting method
Yes, this method takes a little bit more time and energy, but it also will provide you will long-term financial benefits if followed.
To do this we are just going to expand on the lazy man’s budget mentioned above. Rather than having just 1-3 categories of items budgeted for, we are going to create as many as we need to put a limit on our spending in all areas.
You can use the mentioned budget spreadsheet as a guide for tracking your progress. Try to account for every possible expense that you could run into. You will never be able to budget for every possible scenario, but the goal is to minimize surprise expenses. Inevitably, there will still be surprises from time to time - so I suggest creating a category for these surprises (or you can just use your emergency fund).
How to stick with your budget
The almost sure-fire way to make a budget that fails is to NOT budget for any fun stuff. I wrote about how budgeting should be fun and it is a necessary ingredient for success. You need to budget for clothing, entertainment, going out to dinner, or whatever else it is you love to do! The key is to do it in moderation and to set limits and abide by them.
The amazing thing is that by budgeting for fun stuff, it actually liberates you to spend money on these items. When you have money budgeted each month to buy clothes, the money is now sitting there waiting to be used for that assigned purpose. Suddenly you can go clothes shopping without feeling guilty!!
This is how budgeting truly becomes fun. When you have money sitting in the bank waiting to be spent. Or, even better: if you start budgeting for vacation and after a little while you have hundreds of dollars begging to be spent on a vacation!! You go on your trip and come back home and don’t owe any money to a credit card company - now that is how a budget becomes fun and what helps you stick with it!!
Other budget options
There are many ways to make a budget work. The key is to finding a system that works for you and sticking with it. This article has gone over a basic method of budgeting, but I also suggest you check out the envelope budgeting method, or the method that I use to budget with ING.
As far as paying for budget software I think it depends on the user. It is not a necessity by any means, but most software programs will make your life easier and save you time. It just depends on personal preference really.
That said, my favorite budgeting software tool that I have found is called Mvelopes Personal. They are basically like a virtual envelope system for budgeting. They have a very simple and intuitive method for budgeting that is one of the best out there. If you want more information you can Take a tour of Mvelopes Personal.
Another budgeting tool I found is called YNAB and you can find out more about it at YouNeedABudget.com. It is a very basic tool that will help keep your budget organized. I don’t like it as much as Mvelopes, but I think it is a little bit cheaper.
I would love to hear what has worked for you and what hasn’t. Let me know in the comments below…
Technorati Tags: make a budget, budgeting
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To the beginner…
Money management is not just for big corporations. It is for you and I as well. It doesn’t need to be labeled with terms like money management or budgeting. If you are where I was, it means nothing more than GETTING RID OF THE CHAOS.
If you are just beginning to get your financial life in order - I am excited for you! It is a fun journey and it is well-worth the effort. The peace that comes with knowing how much money you actually have and being in control of your spending is truly priceless.
Not too many years ago I was out of control financially with my maxxed out credit card and empty (and likely overdrawn) bank accounts, and not a dollar in savings. I decided that I was not going to live my life out of control and had to get things in order.
It did take a little work and a little time, but it is not much different than cleaning out a junk filled garage. It looks like an overwhelming task, but once you get going, it is easy to keep going. And once it is finished, it brings a sweet taste of satisfaction of a task accomplished.
Money Management
If you are looking for a way to get your bank accounts set up to to make bill-paying simpler I have laid out how I organize my bank accounts. And how I manage my bill payments will show you the steps that I take to keep my bills in order and pay them 2 times a month.
I also use a balance sheet to keep track of my financial life. You can also download a copy of my balance sheet template that I use.
Budgeting
If you are making the wise move to start a budget, I suggest reading why budgeting is like baking cookies to get some fun into your budgeting and these 4 quick tips to sticking with a budget.
Then you can learn some techniques with how to budget with the envelope system or how to budget with ING direct.
Saving Money
If you are having trouble spending too much money, then I suggest you read how to quit spending more money than you make or the trick to saving money.
If you are having trouble finding money to save read how to find money to save. One great way to find extra money to save, is to use the money from your raises at work. Read what to do with a raise for a more detailed analysis of what I do with each raise.
As you take your beginning steps with managing your money you will find that it is a lonely journey sometimes. Most people do not ever get their financial lives in order, and sometimes you can feel like you are not normal. Well, the truth is that in the U.S. “normal” means living paycheck to paycheck and in debt up to your eyeballs. Who wants to be normal anyway? Here are 16 ways to save money by not being “normal”
Building an Emergency Fund
One of the best tips for beginners is to build an emergency fund. Experts recommend anywhere from 1 month to 6 months of your expenses. It really depends on your personal situation.
Don’t be intimidated by the amount, just start saving, realize it may be a distant goal, and keep going and you will get there!! It is a very comforting feeling, knowing that if the car breaks down or the water heater breaks that you have money in reserve waiting for it.
If you are wondering if you need an emergency fund you can read “do I need an emergency fund?” and if you already have one and are looking for ways to make more money with it check out how to make more money with your emergency fund.
Saving for Retirement
So you want to retire? You mean you don’t actually want to work until you are 85? Good, me neither. The good news is that it is never too late to start saving for retirement. And, the earlier you start, the better off you will be. I have a quick and easy solution for twenty-somethings to retire well off.
You can find out more about saving for retirement with these 4 quick steps to retirement savings.
I think this should give you a good start at managing you money like a pro, keeping checking back (or get updates in your inbox) as I regularly aim to provide money management tips for beginners and veterans alike…
Veterans: Do you have any suggestions for beginners? What financial advice do you wish you would have received when you first started the journey?
Technorati Tags: beginner tips, money management
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YNAB = You Need a Budget. YNAB Pro retails for $39.95 and was kindly donated for the giveaway by the folks at YouNeedABudget.com
If you are interested in getting a free copy of YNAB budgeting software, then keep reading for instructions.
YNAB Pro giveaway
YNAB Pro giveaway There will not be any hoops to jump through in order to win. You won’t have to link back to this site, you won’t have to digg or stumble anything (although it would be appreciated), you won’t even have to say anything nice about me!! 
So what do I have to do to win the YNAB budgeting software?
If you would like to be entered for a chance to win the YNAB budgeting software, just type “YNAB” in the comments below before 11:59pm CST on December 24th, 2007. A few more notes about the YNAB Giveaway…
- From those comments entered I will randomly select a winner using random.org.
- Go ahead and enter for each of the prizes, but only enter once (per household) for each one. (Duplicate entries or IP addresses will be disqualified)
- Make sure you enter your email address when adding your comment so I can contact you if you win.
- The winner will be announced on Christmas morning!!
Check back tomorrow for more giveaways!!
del.icio.us Tags: YNAB, Budgeting Software
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Dividing large bills into smaller chunks can make them much more manageable.
They say the best way to eat an elephant is one bite at a time. The point is, that when you look at the size of the thing, it is overwhelming, but by working at it one small bite at a time, you will make progress and eventually you will complete the task. The same principle applies to our finances. Be it saving for retirement, eliminating your consumer debt, or paying a huge bill.
In our state we have to pay taxes on our personal property. So, at the end of every year we owe a few hundred dollars in property tax for our cars due on December 31. A bill for $350 can be challenging at any time, but right after the Christmas spending spree makes it even more difficult.
The great news is that for $29.16 a month I can have all of the money saved up for that bill when December rolls around again. This is part of my budgeting with ING Direct that I use. I create a savings account for each “elephant” sized bill and divide by 12 to figure out how much I need to save on a monthly basis. A side benefit is the interest that is being earned all year long on that savings.
If you haven’t tried saving up for large bills, I promise that you will absolutely love the feeling you get when you do. It almost makes me excited when the bill comes in, because I don’t have any question of where is the money coming from. It has been sitting in a savings account just waiting all year for that bill to come in.
I use this method with car insurance premiums rather than using the monthly rate that some companies offer. Normally there is a fee charged for the monthly billing option and you can save yourself a few bucks a month by paying the 6 month premium all at once.
Oh and don’t forget to use the interest you earned to take yourself out to lunch, because you’ve earned it. 
Technorati Tags: saving techniques, budgeting, pay large bills
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Start Saving Early
Duh. That is SO common-sense. Well, it is. But for some reason, I used to be surprised year after year at how hard Christmas hit my wallet. We know its coming. It is the same day every year. We can’t run from it, so we might as well save up for it. Sometimes these simple things take a while to sink into my skull, but I finally figured out that by saving up for it, I was a lot more likely to stay out of debt. Often times it is the simple things that have the biggest positive impacts on our finances. It is mid-November. Let’s start saving.
Create a budget for how much you will spend
Why after every Christmas are most people looking at huge credit card bills wondering, “Where did all that money go?” It is no different than any other area of our lives, if we don’t have a leash on it - it will be out of our control. Think of your money like your neighbor’s dog - Oh yeah, your neighbor thinks he has his dog under control. But every time he has the dog in the front yard it runs over and jumps on you. He thinks he has control of the dog, but I am sure if he had a leash on the beast, he wouldn’t let it jump on you when you are on your way to work. Of course you probably are not going to tell him that his dog is terribly behaved, just like my checkbook isn’t going to tell me that I have no control over my money. In order to have control you have to monitor it (dog or money) or have a system in place (fence or budget) that will do it for you.
My wife and I started doing this a couple years ago, after we realized how out of hand our Christmas spending was getting. We just sat down and made a list of everyone we were going to buy a gift for that year. We wrote down (actually we used Excel) how much we were going to spend on each person and totaled it up. We took this total figure and worked backwards from Christmas to see how much we would have to save each week in order to have enough. This helped us get motivated to start saving early.
Stick to your budget
After all, that is why you created it in the first place - right? If you decided to spend $20 on Billy Ray, then you have to be vigilant not to buy him that $50 toaster that is just glistening in the florescent light of the department store. Don’t get me wrong, there is nothing more fun than giving great presents, but you have to be honest with yourself and others about what you can spend. Trying to spend $100 on each person’s gift when you only have $10, isn’t being truthful and it is going to hurt you more than anyone else. This is the whole “keeping-up-with-the-Joneses” disease that is rampant these days. I think most people you are buying gifts for would want you to give from your heart, rather than under compulsion to spend huge amounts of money that you do not have.
Get Creative
When you are strapped for cash you have to use creativity to get the upper hand. A creative gift can often beat out the most expensive gift. I am not talking about, “it’s the thought that counts, dear.” I am talking about meeting a unique need or desire for that person. To give the best gifts you need to know about the recipient. Listen to what they talk about. Listen for clues as to what they are interested in. It probably isn’t a necktie or a picture frame. Shop accordingly.
Shop Online
A lot of brick-and-mortar stores can’t compete with the prices of the online stores even with the additional shipping costs. If you decide to do a bunch of shopping online this year, Amazon.com has a deal where you can ship as much as you want for a year for $79. And they are not just a bookstore anymore, they have everything from electronics to candles and you can even buy an engagement ring from them.
Start Shopping Early
I love the convenience of online shopping, but I also love going to the malls in the heart of the Christmas season. Granted, the parking normally isn’t fun, but I love Christmas (ask my wife and she will tell you how annoying I am - i.e. Christmas music starts November 1st) and it just doesn’t seem like Christmas to me without spending some time in the malls during the season. Since department stores start breaking out the Christmas decorations after the 4th of July sale (slight exaggeration, but not much), you have plenty of time to get started early and have the “spirit of Christmas.”
The key is to use early shopping to your advantage. Having your budget in mind, it gives you a lot more time to think about WHAT to buy everyone and gives you more opportunities to catch things on sale.
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For some reason the word “budget” has an interesting effect on most people causing them to cringe in pain more than the thought of going to the dentist. It really shouldn’t be as painful as people make it seem. If done correctly, it should give you MORE freedom to get what you want. If you think of a budget as a plan “that takes away all the fun” or eliminates your ability to get things you want, then you are doing it wrong.
A budget is no more than “measured spending.” I think it is a lot like baking cookies. Just like cookies, to make the perfect batch you have to follow a recipe and measure each ingredient. Of course you can improvise a little bit, but each slight variation changes the outcome of the cookies and can take a great recipe and make it mediocre, or a decent recipe and make it great.
Budgeting is not like cookies without sugar
Most people seem to think of budgeting as baking cookies without sugar or chocolate chips. To me chocolate chip cookies are the only kind, so if they don’t have chocolate chips, they aren’t really cookies.
A budget is no different, if you don’t have money budgeted for areas like going to the movies, vacation, buying clothes, or even “blow money” then IT IS like baking cookies without chocolate chips or sugar!! Of course no one likes it!! Who would eat cookies without sugar or chocolate chips?
On the other hand, if your cookies are all sugar and all chocolate - well, that doesn’t sound good either.
The reason many budgets fail is because people forget to add or are instructed to eliminate the ingredients they enjoy the most. If you invent a cookie that doesn’t have sugar or chocolate chips please let me know
Budgets are NOT supposed to be TORTURE!
Don’t get me wrong, there may be some slight discomfort, if you have never told yourself NO, you will have to say NO to yourself occasionally. If you are currently spending more than you earn - just like the little kid who eats chocolate until they vomit, you will have to learn to say NO when you just want to eat the whole bag of chocolate chips in one sitting.
This is the other main reason that budgets fail. A baker has to be disciplined enough to know that just because sugar and chocolate are good, it doesn’t mean that they can just add as much as they want. Having the correct amount of each ingredient is the key to great cookies.
Don’t forget you SHOULD add sugar and chocolate to the cookies, it is what makes them good!! Maybe just not the whole bag.
Find a recipe you like
Creating a budget is a trial and error process. Just like creating a recipe from scratch will take you a few attempts to get it right, a budget is no different. Using someone else’s recipe may give you a head start, but still may need to be tweaked a little to fit your personal preferences (check out budgeting with the envelope system and budgeting with ING Direct for a head start).
Stick with what works
Once you find the recipe that you like, the only way to get those cookies exactly the way you want them is to follow the recipe. Sure, you can bend on the ingredients if you need to - after all they are YOUR cookies. But learn from the pros - cookie companies may spend years or months developing a recipe, but once they find a great recipe that works, they print out a recipe that measures out each ingredient that will yield those great cookies if followed exactly.
Cookies are made for enjoyment
Cookies are baked by someone for someone to enjoy. Budgets are the same, being disciplined to follow the recipe may be a little bit of a challenge, but the rewards are the cookies!
In terms of a budget, the reward is having control over your financial life, rather than letting it control you, telling your money where it should go, rather than being told, watching debts shrink, watching savings increase, and not really having to think much about money. Now those are some good cookies!!
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Well, I think everyone KNOWS what to do with a raise, but the challenge is DOING it (My definition of personal finance is DOING what you KNOW you should DO). Personal finance is 80% doing and 20% knowing. Just incase you don’t know what to do with a raise, here are a few ideas…
Don’t spend your raise…
until you get it. I can’t even count how many times I have received the news of getting a raise and started spending the extra money before I saw it on a paycheck. Inevitably I would spend more than I actually was getting and when it showed up on my paycheck I would be upset because I spent more than the raise was. By waiting until I actually saw the money in my paycheck, I could enjoy the raise, rather than just watching it go out the door to cover my purchases I made the 2 prior weeks.
Expenses rise to meet income, and naturally we find a way fill the gap between expenses and income. This is why you need to make a plan in advance on how you will…
Allocate your raise…
in a way that works for your financial situation. Personally, my allocation plan is:
- 10% Tithe
- 20% Pay down debt
- 20% Retirement savings
- 50% Spend!!
These percentages frequently change based on the needs of the family (i.e. if we are in desperate need of a vacation or if we are planning a large purchase). The point is to have some sort of plan for the increase, before it comes. I have tried it both ways, and I much prefer allocating the raise over spending it in advance. If you can resist the urge to SPEND immediately, allocate your raise wisely, and follow through, you will be nicely rewarded with the comfort of seeing your financial situation improve.
Just following this allocation over the course of a working life would yield a huge retirement nest egg and house that would be paid off many years earlier than scheduled.
Enjoy your raise…
after all, you earned it. Don’t be such a good saver that you can’t enjoy spending money. If you received a raise, you most likely earned it. As you can see with my 50% going to spending money that I am very generous with myself. I love rewarding myself for all the hard work I have put into organizing my financial life.
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Organize your Bank accounts
If there is one thing that I have learned about personal finances, it is that nothing is one-size-fits-all. There are different tools, methods, products, and investments that work for different people at different phases of their lives. My system that I am currently using to manage my accounts and cashflow did not work for me 5 years ago. But now I couldn’t think of anything easier or more efficient.
Below is a diagram showing how cash flows through my accounts.
This is a simplified version, but it gets the point across.
Variable Expenses
Every two weeks, our paychecks are direct deposited as noted above in the diagram into our accounts at our credit union. Our checking account for GAS & GROCERY gets a fixed amount deposited into it every two weeks. From this account we get our spending cash (or blow money), pay for fuel for our cars, and groceries. None of the three are really fixed expenses, so when gas prices rise we are forced to cut back on our spending money or grocery bill.
I sure hope that gas doesn’t go up to $4 a gallon - I won’t be able to eat!! Keeping a leash on variable expenses is extremely important when trying to save money. Most people do not realize that expenses rise to meet income, and they pay the price because of it.
Look at any well established business and you will find that each department has a set budget for the quarter or year. They have to stay within those limits that have been created for them.
Why do they do this? Because it works. Businesses are in business to make money, so if it minimizes expenses they are happy.I am not suggesting to manage your finances like a CFO, but we can learn a lot about how to get things done from the business world.
Fixed Expenses
Roughly 75% of our paychecks go into our BILLS account. When we set this account up, I calculated how much all of our monthly bills cost, divided it by two and set up a schedule for when each would be paid. So, in all honesty I don’t check the balance in this account very often. Since we know how much needs to be paid out each month, we have exactly that amount deposited in. I use bill pay to pay my bills out of this account every two weeks based on my bill payment schedule.
Budgeting
Part of this fixed amount that gets direct deposited into our BILLS account is our ING savings. ING is a great budgeting tool and if you don’t have an account with them, I recommend that you take a look at what they have to offer.
From our BILLS account (every two weeks) I transfer a fixed amount into each one of our ING savings accounts. As the accounts grow I am earning a nice interest rate on my budgeted money.
I would love to hear how you manage your money or any other thoughts or suggestions…
del.icio.us Tags: Organize , bank accounts , finances
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Budgeting with ING Direct
ING Direct has played a critical role in helping me get my financial life organized. They don’t advertise themselves as a great budgeting tool, but they really are. You could probably use this same budgeting technique at other banks, but I will show you why it is more beneficial at ING Direct.
1. Open multiple ING savings accounts
The first step is to open up multiple savings accounts at ING Direct (Yes, ING does allow you to open multiple accounts). At most other banks, this is discouraged, if not by the bank itself, by the amount of paperwork required for each. However, at ING once you have opened up your first account, any additional accounts can be opened with about three mouse clicks.
Each one of the accounts that you open will be something that you are saving (budgeting) for. For example, I have my emergency, vacation, car maintenance, entertainment, clothing, and any other savings funds at ING. I put a fixed amount into each account every pay period (ING can automate this if you would like).
2. Open up a ING Electric Orange Checking account
It is really this checking account at ING that makes this budget system possible. You could still use the ING savings accounts to budget without the ING checking account, but it will be much easier if you have the ING checking as well. And to be honest, I don’t think there is a better checking account out there that is better than ING’s.
ING’s Electric Orange checking is unique in a few ways:
- They do NOT offer checkbooks. It is a debit card based account
- You can send E-Checks to someone elses bank account for free
- It has a 3.93%(at the time of this writing) interest rate even with a $10 balance (try to find that at your local bank)
- Free ATM access at 32,000 locations across the country
- There are no overdraft fees. Instead of charging you $30 when you bounce a check, they just lend you the money until you bring the balance back up to $0. So instead of having a $30 NSF fee, you might have a $.50 interest charge. This alone is reason enough to switch. ING has saved me a lot of money with this feature.
3. Use the ING debit card to pay for items budgeted for
Once you have the first two steps taken care of and have saved up money in the accounts you are ready to go. Now is the fun part: SPENDING!! You have to do some work on the car? Just transfer the money from you car maintenance fund (this is a real-time transfer) to your ING Checking and head to the dealer or if you are like me and like to do car maintenance yourself, head to Autozone and swipe the debit card.
How is that for a simple budgeting tool?
I just get a lot of pleasure in simplifying my life. If you have ever used the envelope system for budgeting, you should be able to notice the advantages of this system. Like I mentioned earlier, you can probably do this at variety of banks, but I think it would be difficult to find a bank that offered all of the conveniences of ING as well as the great rates.
The negatives of using ING as a budget tool
The two things I would warn anyone trying the ING budget:
- Stay on top of your transfers from your ING savings accounts to your checking. If you do a lot of budgeted spending for a couple weeks and forget to do the transfers, it can be difficult to backtrack. Like most things in life, it works better with regular maintenance.
- You can only transfer FROM the savings accounts 6 times per month. This really hasn’t been an issue for me but maybe once or twice in the few years that I have been using the ING budgeting method. (But, I figured out a simple hack to getting around this restriction.)
If you are interested in signing up with ING make sure you contact me so I can get you a $25 bonus for signing up.
How to budget with other tools
If the ING budge method doesn’t interest you, then you could try the envelope system of budgeting. If you are looking for budgeting software to help you budget you can check out YNAB’s personal budget
del.icio.us Tags: How to budget , ING Direct
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