hdYb: Junior Budget

Meet Nick. When he is not making money playing drums for every band in the Shoals, he is working at the Marriott. Nick is freshly out on his own and managing his own money. He has bills such as rent, cell phone, utilities, food, and gas, to name a few and gets paid every two weeks. He is beginning to take the Dave Ramsey approach to budgeting, with envelopes and cash, conveniently called the "Envelope System". The concept is simple: make money, put money in envelopes, spend money. The idea behind putting your money in envelopes is that is creates a physical divide between your gas money and your food money, etc. There's something psychological about seeing green go over the counter that hurts more than swiping a piece of plastic.

He started like any other budgeting method, by planning his budget, putting on paper, how much he will be bringing in against how much he spends, in its own respective category. A good idea for Nick is to budget based on his pay period. Since he gets paid bi-weekly, then he should consider writing down which bills will get paid by which paycheck. Since his pay fluctuates, he should always use his lowest check so he doesn't get the shaft.

There will be budget items that he cannot include in his envelope system, like bills paid by check or automatic withdraw. However, he can create categories like food, gas, clothing and entertainment. Each category will have its own envelope. After he categorizes his cash expenses, he will fill each envelope with the money allotted for it in his budget. For example, if he allowed $50 for clothing, he would put $50 in cash in his clothing envelope for the next two weeks. Once he's spends all the money in a given envelope, he's done spending for that category. If he spends the $50 in his clothing envelope in a single day, he can't spend any more on clothes until he budgets for that category again. That means no visits to the ATM to withdraw more money! It will take a few months to perfect his envelope system, and he should remember to not give up after a month or two if it's not clicking. It will take him a few months to get adjusted and used to not swiping so much.

How do you budget?

Chris