Are you struggling to stay on a budget? Trying to figure out a better way to manage your money? Tired of your personal finances being a source of stress and clutter?
Today I want to share with you a tool my husband and I created to help us stay on target with our finances: our budget binder.
Our budget binder is our personal interpretation of Dave Ramsey’s recommended cash envelope system. I’m going to show you exactly how to make your own budget binder so you can use this easy system to stay organized and financially fit.
1. Gather your supplies
You will need:
- A written budget (If you’ve never created a written budget before, you need to sit down and do that as soon as you are finished reading this post. It is absolutely necessary to your financial success. It really is not that hard to do. I personally recommend you check out financial teacher and author Dave Ramsey and definitely read his book The Total Money Makeover to get a good idea of how to set up your budget.)
- A sturdy binder
- Pocket dividers
(How many you need depends on how many categories are in your budget. You’ll want one for each budget category and probably one each for things like bills, bank statements, pay stubs, receipts, coupons, etc.)
- Pen, stamps, and calculator
- Your cash
- Your checkbook
2. Assemble your binder
Putting your binder together is pretty simple. And you can order the items in whatever way makes the most sense to you. I will tell you how our binder is set up, but by all means organize your binder your way.
In the front of our binder, we have a pocket divider marked “Bills.” We were finding ourselves always scrambling to find bills that had come in the mail and having a hard time making sure they were paid on time. So we put this pocket in the very front of our binder so that we not only have one convenient place to put all the bills that come in, but every time we open the binder the bills are right there basically saying “Pay me!”
Inside our “Bills” pocket is also where we keep a pen, a calculator, stamps, and our checkbook. This just makes bill paying quicker and easier for us if we don’t have to go all over the house searching for those items.
Next I have inserted a hole-punched copy of our written cash budget. To make it even more handy, I have color-coded the categories on this page to match the color of the pocket divider for each category.
We have the pocket dividers inserted into the binder in the same order the individual categories are listed on the written budget page. Your categories will be slightly different depending on your unique circumstances, but here are our cash budget categories to give you an idea:
· Lord (Giving)
· Vehicle Maintenance
· Baby Items
·School Supplies & Extracurricular Activities
· Pocket Money
It has taken quite a bit of trial and error for us using different budget category groupings to come to this list. We have tried using fewer categories, but we feel like we really need this detailed system to truly keep us organized. Do what works for you.
So just insert and label a pocket divider into your binder for each of your cash budget categories. This is where you will keep the cash you plan to spend on each of these categories.
Now you might notice some important expenses like Utilities, Housing, Medical Care, and Insurance are not listed here. That is because those are things we regularly pay from our checking account, and so these items are listed on a separate page in the back of the binder.
We actually have a separate written budget for the categories we pay from the checking account. These are things that we either write out a check for (Rent, Electricity, Water, Medical bills) or expenses that are automatically deducted from our account (Cell phone and Weight Watchers membership). This page is inserted into the binder next after the cash pocket dividers.
To help us keep the “invisible money” in our checking account under control, we include a separate sheet for each category in the binder next. On each sheet, we write down how much money we have allocated to that category in our checking account each pay period. Every time an expense is paid out of that category, we deduct the amount and keep a running total.
Finally in the very back of the binder we have inserted pocket dividers labeled “Bank Statements” and “Pay Stubs.” This is a good place for you to put in a divider for things like receipts you may need for doing your taxes or coupons you want to use.
3. Using your budget binder
Once you have your binder assembled, using it to keep your personal finances in order is pretty straightforward.
Every time you get a bill in the mail, put it in the “Bill” section of your binder. Set aside a specific date each pay period for writing out and mailing off your bills. Never face another late fee or get your utilities turned off because you lost the bill or forgot to pay it!
Bank statements, pay stubs, coupons, and receipts all go into their respective pockets as you get them. This keeps them from getting lost or cluttering up a drawer or desktop.
Every time you get paid, use your written cash and checking account budgets to determine how much cash you need to bring home. Then sit down and, following the amounts you have predetermined on your written budget, place the appropriate amount of cash into each labeled pocket.
As you go shopping or as expenses come up throughout the month, pull the cash you need to cover each expense from the appropriate pocket in your binder. Going grocery shopping? Pull out the cash from the “Food” pocket. Getting an oil change? Grab what you need from “Vehicle Maintenance.” Just going out for an evening of family fun? You might want pull out some cash from “Entertainment” and “Pocket Money.”
When the pocket divider for a specific category is empty, you know you cannot spend any more on that category until you get more money. This is what makes this system so effective for helping you actually plan your expenses and stay on your budget.
Yes, you will be tempted to rob Peter to pay Paul (swap out money from one divider to another), but you have to keep that to an absolute minimum. If you are married, make a solemn deal with your spouse that you will not do this without both of you talking about it and agreeing to it beforehand. If you are single, you might ask someone else to help keep you accountable in this.
The section of your binder for your checking account works basically the same way only you are working with numbers on paper as opposed to cold hard cash. Again, be careful to write it down every time you write a check or swipe a debit card to cover an expense from one of these categories. And again, avoid using money from one category to cover another unless it is absolutely necessary. Find some sort of accountability to keep you straight. Otherwise having a budget and using the binder is pointless.
If you find you are constantly running out of money in certain categories and thus having to cover those expenses with money pulled from somewhere else, you need to rework your written budget. You may be allocating too much money to areas that do not need so much.
Using a tool like this budget binder will not only simplify and organize your personal finances for you; but it can relieve a lot of money-related stress, give you more peace of mind, and help you reach your financial goals.
This post contains ads and affiliate links for products I personally love and recommend. I offer these links as a convenience to you. If you follow these links and make a purchase, I receive a small commission. This has no effect whatsoever on the price you pay for these products. Thanks for your support!
Questions? Comments? Better ideas? Leave them in the comments section below! I love connecting with my readers.