How to Use a Spending Plan: Part 4

Let’s talk about a plan of attack for pay day.

This final step is simple but incredibly important for the success of your spending plan. I’ll give a pay day scenario for those with and without direct deposit.

We don’t currently have the option of direct deposit, so when the first check of the month arrives; I sit down with a deposit slip and my spending plan and divide the entire amount of the check on paper as follows:

  • The amount of cash I need to withhold.

To determine this amount, I scan my expense categories and add up the total amount of cash I need for the first two weeks of the month. For example, if I have budgeted $200 in cash for groceries for the month, I withhold $100 from the first paycheck for this category. I don’t like to carry too much cash on me at any given time.

  • The amount going into savings.

Hopefully you are able to put something in savings each month. We have an automatic transfer to savings, which I highly encourage as it “forces” you to set aside at least a small amount each month.

  • The amount going into checking.

This amount covers the checks I write each month, our credit card bill, automatic bill payments, etc.

Once every dollar has a destination, I then fill out my deposit slip and update my spending plan (see below). I’m an old fashioned pen and paper kind of gal, but you can use an EXCEL spreadsheet or whatever works for you. My ledger looks something like this:


June 2011



6/15/11 $___________________


6/30/11 $___________________




$____ (amount budgeted) tithe $____ (amount given: these numbers should match!)

$____ (amount budgeted) mortgage $____ (amount paid)

$____ (amount budgeted) electric bill $____ (amount paid)

$____ (amount budgeted) groceries $100 ____ (amount spent)



When I fill out my deposit slip, I update my spending plan accordingly. If I have withheld $100 in cash for groceries, I indicate that $100 has been “spent” on my spending plan, leaving room to record when the second $100 is spent. Similarly, when I write checks or when automatic payments are deducted from our checking account, I update our spending plan. The cash updates happen only twice a month with the deposit of my husband’s paychecks, but I find it necessary to update the spending plan with more frequency due to automatic bill payments, checks written, etc.

When we had direct deposit, this system worked very similarly in that I still had to make a trip to the bank to withdraw the cash I needed from that paycheck. I utilized online banking to easily transfer funds to our savings accounts.

Just a quick note about cash: If you do choose to use cash for most of your spending categories, I encourage you to use some type of envelope system. You don’t have to spend money on a system: you can just label a few small envelopes and stick them in your wallet. If you want something a bit fancier, you could check out the wallet I use.

As I mentioned at the beginning of this series, you must tell your money where to go, or it will decide for you! Keeping tabs on your spending plan and sticking to your cash envelopes is the most effective way I know to stay in control and ensure that you spend your money the way you intend to.

Sticking to a budget or spending plan may not sound very exciting, but, if you’ve never given it a try, there’s no time like the present, and I can assure you that you will not regret it!  The plan I have outlined works for me, but you can tweak it, design your own, or try something entirely different. The idea is the same: have a plan, and stick to it!

Do you have a plan in place for June? There’s no reason to let another month go by in which your spending is out of control. Make a spending plan today!


Your turn! Do you use a budget? I’d love to hear your success stories or tips in the comments section!

How to Use a Spending Plan: Part 3


We just returned from a week-long vacation visiting family, so it’s been a while since I posted for this series. Let’s review what we’ve covered so far:

  • In Part One, we listed our monthly expenses and income.
  • In Part Two, we determined which of our expenses could be paid with cash, and assigned a payment method to each remaining expense.

Before we go any further, I must ask the question: when you listed your income and expenses, how did the numbers measure up? Are you spending every dollar that comes in? Are you putting a percentage of your income into savings? Are your expenses exceeding your income? If you are exceeding your income each month, something needs to change immediately. Check out my 30 Ways to Cut the Cost of Living series and make the hard choices to cut back. You’ll reap the rewards in short order!

In order to succeed with this spending plan, every dollar of your paycheck needs to have a designation. If your monthly expenses are less than your income, make sure that the extra money is going toward debt or into savings. Dollars that aren’t designated will inevitably be spent.

So, now that every dollar of your income has a designation on your spending plan, let’s talk about which paychecks will cover each monthly expense.

My husband is paid twice a month, so in addition to indicating a method of payment for each category, I also indicate which paycheck will cover each of the expenses. For example, the credit card is paid by the paycheck that comes on the 15th, the mortgage is paid by the paycheck that comes on the 30th, etc.

If you are a two-income family, you may have a plan similar to this one:

  • Husband’s paycheck: mortgage and monthly bills.
  • Wife’s paycheck: school/ childcare/ college savings/ family vacations, etc.

Your situation may be unique, so determine what will work for your family.

Here’s an assignment to help with this step:


Look at your list of monthly expenses, write bill due dates where necessary, and then determine which paychecks will cover each expense.


This small step is leading up to the final post of this series, in which we will discuss the all-important issue of the payday plan!

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How to Use a Spending Plan, Part 2

Last week I began the series, “How to Use a Spending Plan.” In part one, I discussed the first two steps for establishing a spending plan:

1) List monthly income

2) List monthly expenses (including a misc. category)

(Note: your misc. category may need to be somewhat generous as you start, but it will grow smaller in time as you learn to more accurately predict your expenses.)

How do you currently pay for most of your expenses? Cash? Debit card? Credit card? The best way to control your money, I feel, is to pay with cash for as many spending categories as possible. When the cash runs out, you’re done with that category of spending for the month!

Determine which of your expenses could be paid with cash.

You may feel it dangerous to carry cash for one of two reasons:

1) the risk of loss or theft

2) the risk of spending indiscriminately

The risk of loss or theft is real, but not likely. Reduce this risk by not carrying large amounts of cash.

I think twice about my spending when paying with cash because it’s painful for me to part with cash. Swiping a debit card is much easier for me. You may be the exact opposite! Swiping a debit or credit card might be painful for you and cash might easily slip through your fingers. Decide which method is more “painful” for you–spending cash or swiping your debit card and assign this method of payment to as many of your spending categories as possible.

We do currently use our credit card for some expenses each month, like gasoline and a few online bill payments. However, we are always sure to pay it off faithfully each month.

Sit down with your list of income and expenses and assign a method of payment to each one.

Here is an example from a portion of our family’s spending plan:

Shorthand key:
C = Cash
√ = Check
D = Debit Card
Auto √ = Automatic Payment from Checking
C C = Credit Card


√ – Giving

Auto √ – Mortgage

C – Groceries

D – Online purchases

C C – Gasoline

C – Misc

C – Eating out


Does each of your spending categories have a payment designation now? Great! Stay tuned for the next step in part three.



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My Cash Envelope System

Several of you are asking about my cash envelope system, so I thought I would write a quick post and give you the link to the wallet that I use. It’s through Dave Ramsey, and my particular wallet sells for $19.95. I highly recommend it!

Here’s what’s inside:

  • Coin pocket
  • Checkbook and check register holders
  • Convenient slots for your debit card
  • Extra cash-management envelopes

How to Use a Spending Plan, Part 1

Have you ever been told, “You’re not my boss!” As the oldest of 8 children, I know I have!

Do you ever feel like you can hear your money saying this to you? I have felt that way, m-a-n-y  t-i-m-es. It seems that, regardless of our best intentions, our money has a mind of its own and simply goes where it wills!

Is this a truth statement? Notice I said, “it seems that…” In reality, our money goes exactly where we tell it to go. The problem isn’t the money, it is us!

I’m not denying the fact that unexpected expenses arise. It’s a fact of life. But even “unexpected” expenses can become “expected” when you are operating on a spending plan.

If you’re like most folks, the idea of a “budget” or, as I prefer to call it, a “spending plan” seems overwhelming, constricting, and generally unachievable. In my experience, the truth is quite the opposite! Here’s the key: for the most part, every dollar my husband or I earn is already assigned to an expense before it even hits our checking account.

Ready to jump in? Let’s make a sample spending plan for the month of June, 2011 in two simple steps.

Step One: List Income

When I sit down to write my spending plan for the month, I always start by listing our income. Since my husband is the only one “bringing home the bacon” at the moment, this step is rather short! When we were going through grad school, though, we had multiple income sources, so I had to list each one. We have always been paid twice a month, so I list the income we expect to receive on the 15th and the 30th of each month in separate columns. The top of my spending plan looks something like this:

June 2011


15th: $__________         30th: $                          

Other: $                                 Other: $                        

My husband is a church organist, so we occasionally have other income in a month through weddings and funerals, hence the “other” category. Adapt this idea to fit your situation.

Step Two: List Expenses

Next, print my Monthly Expense List, grab your checkbook register, credit card statement, last month’s bills, and list all of your projected expenses for the month of June. (If you already completed this step during the 30 Ways to Cut the Cost of Living series, you are ahead of the game!)

Don’t forget to include expenses like income tax preparation, (e.g. Turbo Tax Online), babysitting, clothing, giving, eating out, and oil changes. Be as thorough and realistic as possible.

Take a moment to complete these two steps, and then stay tuned for part two!

If you haven’t done so already, be sure to follow me on Twitter or Facebook and subscribe for my email updates so you don’t miss any part of the series!

New Series Coming: “How to Use a Spending Plan”

I hope you enjoyed the previous series, 30 Ways to Cut the Cost of Living. I am grateful for your comments and feedback! Hopefully you are still exploring ways to reduce your expenses. Keep at it!

I’m excited to begin a new series, “How to Use a Spending Plan.” If you struggle with making the ends meet at the end of the month (or during, for that matter!), I hope you will join me for a practical, realistic approach to tackling the monthly budget. (Did I say the “B” word? Excuse me…I meant to say, “spending plan”!)

This concept goes hand in hand with the idea of cutting monthly expenses. Your money needs to have a plan and go where you tell it to go. As we work through the series, I hope you will find that this is a more achievable goal than you thought.

Note: The posts for this series will come as I have time to write them, so please don’t be surprised if there isn’t a new one each day.

If you haven’t done so already, be sure to follow me on Twitter or Facebook and subscribe for my email updates so you don’t miss any part of the series!

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