Once a realistic family budget has been set up, allocating your paycheck to budget categories is next and the real work begins. Each time you receive a paycheck, the money needs to be allocated its expenses from it tracked.
It is key that you learn to spend from your budget categories and not simply what is left in the bank. This way, your bill paying will be systematic and you'll never worry whether there's enough to cover a particular expense. If you are paid once a month then the entire budget category amount is allocated at once.
For example, paying $600 per month in food, than $600 is written down and all monthly food expenses are individually deducted from the $600. You always know how much you have to spend until the next paycheck.
Being paid twice per month simply means you cut in half the $600 and allocate $300 to the food category. And of course, a weekly paycheck has you dividing by four, putting down $150 to spend for the week on groceries.
This cash flow management exercise forms a huge portion of your family budgeting process. As a matter of fact, this is the exact point where people will either make it or fail as self-discipline and delayed gratification are vitally important skills.
Once you have your budget on paper, having mapped out your financial requirements and needs, utilize cash as well as a checking and/or savings accounts to pay expenses.
Always remember though, that the total of these three cash holding places must equal the total of all individual spending category balances. If not, something went wrong. Pull out the calculator and figure it out. Do not get frustrated. Eventually, the allocating to budget categories process will become intuitive.
Here is some sage advice I tell my prospective coaching clients before we start:
Effective household budgeting takes three months to understand the process, six months to really get it, and a full year to have a realistic budget to work with. So, the sooner you start the better. However, within that amount of time, the self-disciplined client saves an incredible amount of cash as well as financial stress having been melted away.
And it is typical to have all of your personal debt gone in three years or less. So, do not get frustrated when this process at first looks as if the numbers are changing every month. They should and shows that your household budgeting process actually is working as you are keeping a pulse on the family finances and have a mechanism to make realistic changes.
So, does that mean to rejoice in your early frustrations? I suppose you can, knowing that you are becoming more informed and prepared. You are ready to respond with appropriate action when required.
Budget adjustments are needed when changes happen in:
You see, the only things that stay constant is change and God's love for us. As you stick with your household budgeting process, seeing how your goals are met and stress reduced, you get more motivation to stay out of debt, keep track of your spending, pay bills on time, cut costs, and live more frugally.
What are you waiting for? Get started allocating your paycheck to budget categories now!