3-Step Organizational Plan to manage your money - Part 2

In Part 1, I outlined 3 steps we use to organize our budget.

1. List your income
2. List your bills
3. Subract for spendable cash.

In this post, I want to expand on those three steps. I thought I had this post done earlier. But I showed it to my wife who has successfully explained our system to several people and she gave me the equivalent of a kiss, or K.I.S.S. (Keep is Simple Stupid) So I'll try again.

My net income is the same every week. Net income is what you need to consider. Include child support, Social Security checks, Pension, or any other income you might have after taxes. If you have more than one income, include them all.

So I list my net income. However, every other paycheck I might get a bonus. Since the bonus is not guaranteed, we do not count that in our income to apply to our monthly bills. If there is a bonus, it is exactly that, a bonus. We are just that much ahead. But if I don't get a bonus, we aren't cutting ourselves short because we were not planning on that for our budgeting purposes. So my income is simply listed in two columns for the 1st and 15th because that is when we pay our bills. Then we list our expenses under those two columns. On the 1st we list the bills that we need to pay before the 15th paycheck will get deposited. Under the 15th we list all the bills that are due before the 1st of the month paycheck will get deposited. Then all we need to do is subtract to find what spendable cash we have left for that two week period.

When you are done, it may look something like this:

Income: 1st of Month _____________ _______________

Bills: 1st of Month
Rent or house payment______________
Credit Cards______________________
Groceries________________________
Gas (Cars)_______________________
Cell Phone_______________________
Savings_________________________
Total Bills: _____________________ _______________

Spendable Cash: ________________ _______________
==================================

Income: 15th of Month ___________ _______________

Bills: 15th of Month
Car Payment ____________________
Groceries _______________________
Gas (Cars) ______________________
Utilities ________________________
Savings ________________________
Total Bills: ____________________ _______________

Spendable Cash: _______________ _______________

It is quite simple. When you deduct total bills from net income, what you have left is spendable cash. If there is no spendable cash left, obviously you need to lower your bills or raise your income. Looking at your finances this way gives you a quick look at where you are. Whenever your income or a bill changes, it is easy to update the chart and you know again exactly where you stand. You can write this chart on a piece of paper, or create a Excel spreadsheet. The important thing is to do it. Happy spending!

A 3-Step Organizational Plan to manage your money

Our simple budgeting process grew out of necessity. As the 17th Century Irish Poet, George Farquhar, said, "Necessity, the mother of invention".

When I started graduate school shortly after getting married, my wife got a job to "put me through school." We soon discovered there was "too much month and not enough money." We needed help! Luckily my wife was able to find a better paying job. But this cloud also had a silver lining. We discovered a very simple way to manage our money which we call the 3-STEP PLAN. We have used this ever since with great success.

Here is a very simplified version of our money management system:

1. List your income.
2. List your bills.
3. Subtract to calculate your extra, spendable cash.

I know this sounds way oversimplified. However, I am surprised at how many people I talk to who have never taken the time to do this simple process and are constantly in financial trouble. A little organizing of their finances using this 3-Step Plan could help them a lot.

There are of course many variables to these three steps. I will expand on our budget organization process over the next few days. So check back for further explanation of our budget system.

By the way, while searching for the author of the first quote above, I ran across a handy site to find quotes. There you can search for over 300,000 quotes by over 20,000 authors. Some people have taken the time to organize quotes for us. How nice!