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I was running our monthly budget numbers last week and realized that there are several steps to our budget that I may not have shared with all of you.  You may have seen the plan and the end results before, but here are the actual steps of how I budget:

  • We mainly spend using credit cards, the Discover More card and the Penfed Visa.  If we take cash out for any little extras, I put it into our budget under “cash”.
  • After the end of our budget month, which is on the 13th of each month, I print out our credit card statements.
  • I look at every single item on each statement to make sure it belongs.
  • I then go through each statement with different-colored highlighters.  Pink is for any vacation or big fun expenses, yellow is for blog expenses, green is for my husband’s fun money expenses, orange is for my fun money expenses, and purple is for any big home or car expenses.
  • I add up all the amounts of each color and transfer that much money from each of the appropriate bucket accounts.  For example, if we spent $325 on a car repair and I spent $30 on my blog, I transfer $325 from our ING car account and $30 from our ING blog income account into our ING checking account to cover those parts of the bill.
  • Once all of the extras have been handled, I pay both of our credit card bills.
  • Then I pay all of our savings goals – $350 to the emergency fund, $500 into the car and home account, $400 into the tax account, $240 into the cash for extra investments account, $120 into each fun money account, and $200 into the vacation account.  I pay them in that order, so if we run out of money, only the fun money and vacation accounts are gypped for the month.
  • After the bills and goals are paid, I take a look at our ING checking account again.  I like to keep $1000 in it for padding, but if there is more than that left, I divide the remainder as follows: the Emergency Fund/Savings account (25%), the Extra Cash for Investments account (35%), the Vacation account (20%), and our two individual Fun Money accounts (10% each).
  • Once all of that is done, I enter every single expense and savings amount into the correct category of our Excel spreadsheet.

This whole process takes me 2 hours a month and lets me know if we went off the deep end on spending in any specific category.  My ING account bucket system is why our budget is so even every month – you don’t ever see the occasional huge expense since I covered it with the appropriate account’s money already.  I simply am able to show you that we are paying a certain amount into those accounts every month.  I will let you know if there is ever a time where an expense can’t be covered by its designated ING account, but that hasn’t happened yet for us.

What do you think?  Is my system crazy complicated to you?  What system do you use?