If you missed Part 1.

Once you come to an agreeable budget where everything you spend has an allotted spot and assigned amount, you are ready to start budgeting. The column called pay frequency will be the figures you work with each time your pay check hits your bank account.  The bank column figure is initially the same as the pay frequency amount and is what has accumulated for that category in your actual bank account.   This would be similar to assigning cash to an envelope only electronically (and it has no problem breaking a $20).

As the week progresses and you inevitably spend money,  you simply add these figures into your spent column which will automatically generate the amount remaining in your balance column.  I use a simple excel spreadsheet which consists of basic formulas that add and subtract for you.

For example, I was at the grocery store and spent $125 and then proceeded to fill up the car with gas totalling $50.  I simply place the $125 in groceries spent and the $50 for gas in the fuel column and the resulting figure that is generated is the balance tells me how much money in my account is allotted for each particular category.  This carries on until the following pay check at which time I edit the whole budget to reflect the addition of money.

To edit this upon payday start at the top and work your way down each category.  First check what is remaining in the balance figure and add that amount to the pay frequency amount.  The total is what you plug into the bank column telling you what you have remaining until pay day.

For example, of the $200 you have alloted each pay for groceries you may have only spent $125 leaving you with $75 to be added to the $200 (pay frequency) you now have since you just got paid.  In the bank column you would edit this to show $275 and delete the figures you have put into the spent category (remember you are starting over because it’s a new pay period) Simply go down each column deleting the spent and adding what is remaining in the the balance category to the amount you have assigned for each item.

The figure that appears in the balance column (the total at the bottom) should match exactly what is in your associated bank account.  If there is extra money or less for that matter, you have to go back to your bank account and figure out what was withdrawn that was not reflected on the budget.  Did you remember to take off the $20 you spent on McDonalds or the $10 it cost for the prescription you picked up before work?  Every cent is accounted for and should be reflected.

The balance on many of these categories will continually rise until the inevitable happens; your child gets invited to several parties at once or your car breaks down.  No problem you have an accumulated amount in one of these categories that can more than take care of the expense.  If you find that you need to spend money on something and don’t have a category,  now it’s time to create one.  It may mean one category has to be reduced in order to input another but if you found yourself needing it chances are you will again.

The thing with budgeting is it is ever changing and ever evolving.  I have been using this system for 7 years and I am still adding and subtracting categories and amounts.  With the click of a few buttons I can assign more or less money to a particular category based on our needs at this time in our lives.

I plan to do one more post on this topic…then I will lay it to rest.

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