Today we are going to talk about one of the most viral principles I have ever taught. You may or may not know that I am a life style budget and frugal living expert. It happened on accident. Earlier, I was in a lot of debt. At one point I was living off of credit cards. Being self-employed and having a new baby, I had a real estate investment go bad. We got out of $15,000 of credit card debt in 13 months. That was while my husband and I were only making $31,000. Let that sit for a second. I will show you the methods I used in doing that today.
I’m going to teach you the simplest budgeting technique, ever. It played a huge role in getting us out of debt. It’s played a huge role in keeping us out of debt. It has played a giant role in allowing our family to live in our dream home. We live this dream life, while remaining extremely frugal. We manage our money well. Today, I’m going to show you how a little envelope can change your life. Let’s get to it!
Small Spending Decisions
Many people think that in order to get out of debt, or save money, or be good with your finances, that it comes down to the big high dollar decisions. That isn’t true. The way we were able to get out of debt, and the way I’ve been able to help thousands and thousands of families manage their money, is not by focusing on the big decision but by focusing on the little day-to-day $1, $5 and $10 dollar spending decisions that you make. We’re going to focus on them now.
I’m sure many of you have heard of envelope budgeting. There are lots of different methods out there, but in general you have several envelopes. Each envelope is assigned a certain amount of cash. Maybe you have a grocery envelope, a clothing envelope and eating out and hair envelopes. There are also dog grooming envelopes, and gas and nail cutting envelopes.
It works for some. For me, it didn’t work. It wasn’t sustainable long term. What if I don’t need money in this envelope this week? What if I need more in this envelope this week? At the end of the day, I was basically just putting all the cash together and using it where I needed to use it. That system, for me, didn’t work. I recommend simplifying.
The first step of my simple budgeting technique is to get rid of all your budgets, and to just focus on three. Budget number one is “family stuff”, This includes utilities. We considered gas utilities in our house, mortgage debt payments, home or car repairs, anything that could be set up on auto pay. Anything that has to do with a utility bill or have to do with a repair or an emergency. It includes medical bills.
The second budget is the “lifestyle budget”. This is the day to day standard “mom” spending. It includes groceries and anything consumable. If you replace it regularly (like toilet paper), it would be added to this second budget. It includes diapers, wipes, cleaning supplies, dog food, paper plates, shampoo and deodorant. These are items you would buy at a local grocery store.
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The final envelope is everything else. This would be things that are not family and not grocery. Everything else, such as going out to lunch, or taking your kids to the aquarium. If you are buying shin guards or getting a haircut, or buying a new throw pillow for your couch, these would be assigned to the “other” budget”.
What we’re going to focus on are the two budgets that we have complete control over. These are the grocery budget, and the “other” budget. Quick disclaimer, I am talking to whoever it is that’s doing most of the day-to-day spending in your household. My husband doesn’t do the grocery shopping. I’m the one cooking the meals and planning the meals. I’m the one that’s doing the grocery shopping. Out of all of my spending responsibilities, the one that I need the biggest budget for is grocery. This is why I separated the budgets into three. I’m in charge of groceries and “other”. My husband does not do the grocery shopping. He’s responsible for the “family” budget.
$100 Per Person Per Month
Let’s discuss how we handle these budgets. We will start with grocery. That’s an easy one. I have a very simple formula, which is $100 dollars per person in your family, per month. In my family, I’ve got five kids and two adults so $700 a month is what I’ve got for groceries. Remember, that isn’t just food. It’s consumables and things. If you’ve got two kids and two grownups, that is $400 a month.
Break Down Per Week
Here’s the real secret with that budget. So many people try to budget their groceries per month. I find that if you hand me $700 at the beginning of the month, I’m probably going to do something stupid with it. I’m going to blow it in the first week at Costco. If you break it down per week, then you’re only looking at six or seven days, not 30 or 31. Six or seven days is totally doable. It’s all about pacing yourself.
Get an Envelope
Next, get yourself an envelope. It doesn’t have to be pretty or beautiful. Divide it in half. Now write the month at the top of the envelope, for instance “June” (see image below). Then remember we are only focusing on those two budgets that you use week to week, not your family budget. Let’s say you’re dealing with a family of 4. That would mean $100 per week for grocery. I’ve got $200 a week to cover everything that I’m responsible for.
They’re going to divide the envelope by four, representing four weeks in a month. If you’ve got a month that has five weeks, you can either continue with your $100 per week budget and remember at the end of that month you’re going to spend an extra $200, or you can take five weeks divided by $400. Do whatever is best for your family. On the side of your envelope, write the dates for that week.
Pay From Envelope, Replace Money With Receipt
You keep this inside your wallet or your purse. I firmly recommend buying a wallet with a snap, not a zipper. This can fit right inside your wallet. Let’s say you need groceries, so you go to the store. When you get to the checkout stand, you need to open your wallet. You will hand them your cash, or your card. You pull the envelope out. When you spend from it, you write down the total. This is like a check register. We’re going to keep track on how much we have left. We’ve got eight dollars for the rest of the week. That is plenty, if you run out of a gallon of milk or need like one quick thing.
Grocery Shop Once a Week
My rule is only go grocery shopping one time per week, no matter what. Else, every time you go you’re going to be spending 50 bucks, then throughout your week as you spend money. Let’s say you go to lunch and spend $12. As you spend, you keep a running total so you know exactly how much you have left to spend that week.
The beauty with this, when you’re done paying, you write your total. You take that receipt you stick it right in this the envelope. You then put it back in your wallet. At the end of the year, you’ve got 12 beautiful little envelope with a receipt for everything you spent money on for the last 12 months. Now you have it if you need it for returns or for taxes
What if You Overspend?
Let’s say you go to the grocery store and you spend a hundred and nineteen dollars. Oh no, we’ve gone over by nineteen dollars. Many people think they should borrow from the next week and just take 19 dollars off of there. Let me tell you folks, that does not work. You’ll find yourself borrowing and borrowing and borrowing. By the end of the month you will have nothing left. Don’t ever borrow below the line. If you need $119 for groceries, or even $150 dollars for groceries that week because you’ve got absolutely nothing in your fridge, or maybe you’re having a big barbecue with family, you would just take that extra $50 away from your other budget.
Many people are probably in a cold sweat panicking, thinking I cannot survive on a hundred dollars per week for groceries. If you only have four people in your family, yes yes you can, because guess what? It’s not for a whole month. It’s only six or seven days. Buy what you need within a hundred dollars. Plan your meals out or shop with a list. Don’t buy everything that. Choose an affordable store if you need to buy gluten-free or if you’re on a special diet. If you choose to buy all organic, that’s fine. Just know you’re going to be getting less groceries with that amount of money. You’re going to need to wait. It’s just seven more days until you can buy another hundred dollars worth. If you have five people in your family, it’s $125. It’s plenty of money, I promise.
Stock Up On Sale Items
If you plan ahead, use what you have. Stock up when things are on sale. Shop with a list. Plan your meals in advance. Let’s say you have a week where you’ve got soccer pictures. That’s fine. Maybe you need a hundred and fifty dollars for the “other” budget. You can balance back and forth. Simply stay within the budget that you set and make it work. If you live in Hawaii or San Francisco or a place that’s very expensive, or if you have special dietary restrictions, maybe $100 per person isn’t quite enough. In that case, maybe just add an extra $25 per week. Give it a couple of months and try it. If you’re just going over a budget every single week, then increase it. Again, you want it to be realistic, but you want it to be tight.
If you’ve got a bunch of money left over at the end of the week, then you are giving yourself too much money. If your budget is pretty tight and you do find yourself with a little bit of money left over, stick it into savings. Put it in what I like to call a slush fund. If you find yourself with some extra cash, go buy yourself a throw pillow at Target. Buy yourself a new lipstick or whatever. That’s the beauty of this method, it encourages you to be frugal and be smart with your money. Then you have the freedom to spend it whenever the heck you want.
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Hi! I’m Jordan, and I’ve been dubbed the Fun Cheap or Free Queen. It used to be that “frugal” meant cheap. Miserly. Going without. Giving up everything cool/lovely/fun for as long as you live. The good news? Frugal just got a facelift. Follow me as I teach you how to have more, do more, and live more than you ever thought possible, and have a lot of fun while doing it!