Saturday, January 17, 2009

Budgeting Using The Envelope System

The envelope system can make all the difference in the world because you can visualize how taking a few pounds from the shopping envelope to pay for a movie is actually stealing money from a budget category.

When your money is just a lump of abstract figures in your bank statement, taking a little bit here and there for nonbudgeted items is easier to do. But taking only cash to the grocery store makes you shop more carefully, plan meals more frugally, and put things back on the shelves if you go over the budgeted amount.

A simple tip for taking care of your budgeting woes for regular bills is to pay for a part of each budget item each time you get paid. Maybe your utility bill is due every two months, but your husband gets paid twice a month.

Figure out what your average two-month utility bill is and then divide that number by four. That amount then comes out of each and every pay period for utilities. Sometimes you can plan for a small payment every two weeks easier than for one large payment once every other month.

If you have a monthly mortgage payment and get paid twice a month, write a check for half the mortgage payment each pay period. If you have an insurance payment due every six months, write 12 small checks, one on each pay period.

Budgeting with your partner

When you talk with your spouse or partner about your debts, try to stay focused on solutions to your financial problems instead of letting the conversation turn into a blame game. Both of you are probably responsible for your debts to some degree, and finger-pointing won't pay the bills.

Keep in mind that no matter how hard you try to cooperate with one another, money problems create a lot of stress in a relationship. We can't offer easy solutions for getting through the tough times ahead. We can only encourage you to work hard at keeping your relationship amicable.

You may find that talking about money is easier in a public place, such as a coffee shop or a park. If a change of venue doesn't improve your communication, consider scheduling an appointment with a marriage counselor or religious advisor so you can get at the root problems.

If your spouse or partner is unwilling to work with you to help your family get out of debt, and if you are concerned that his or her spending will condemn you to a life of financial troubles, you may have little choice but to re-evaluate your relationship. Although ending your relationship at the same time you are trying to resolve your family's financial problems won't be easy, you may conclude that it's best.

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