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How I Budget

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 some cheap used tires, 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 with some of the work at home jobs for moms I do – $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(which Im still trying to decide should I invest in stocks or not), $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. I do this while creating passive income streams.  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? Do you know how to make a budget? If not do you want my help?  

28 thoughts on “How I Budget”

  1. Melissa

    Thanks for breaking this down. It is always interesting to see how other people break down their budget and implement it. Do you ever worry that you spend more than you would using cash since you are using plastic? One thing I like about your method is that everything is trackable, unlike cash. (I am terrible about keeping track of cash!)

  2. Everyday Tips

    Very impressive Crystal. My system is more free-flowing because I would need about 85 buckets to cover all our ridiculous categories. (I think I will need a bucket ever for overdue library fees. One of my little rascals didn’t return a book she needed for a report and I thought she did.)

    I envy your ability to be so precise.

  3. No Debt MBA

    Like Melissa, I think it’s really interesting to see how others implement their budgets and manage their finances. Thanks for sharing! I use Mint to keep track of spending and just pay the bills shortly after they come in.

  4. Austin

    The different highlighters are a nice touch! My wife and I save every receipt and enter it into Quicken, categorizing each transaction as one of the budget categories we’ve set up. Our methods are essentially the same, and we have a LOT of automation set up. Nice post!


  5. Little House

    That’s very impressive. I use Quickbooks and pay for bills directly out of our main checking account. Since our income fluctuates, I try to save 10% of our income when we receive it, then dole out the money to pay bills. Since I’ve assigned a category to each bill, I can use Quickbooks to chart what percentage and how much of our money is going to each category.

    I like how you use your credit card and your separate ING accounts to pay certain expenses. I haven’t thought about separating my savings accounts into any more than 3 buckets, but it might be something to give some thought to. Thanks for Sharing!

  6. Amanda

    WAY crazy! Just use mint.com…it is free..you link all your accounts. PLUS, the biggest advantage is that you will see how you are doing as the month goes along so you can make sure to stay within your budget.

  7. Ashley @ Money Talks

    We make an excel spreadsheet every month and track our spending as we go with receipts. We also use different savings accounts to save for different goals. And when we spend money in those categories we transfer from that particular savings too. Honestly we probably spend more than 2 hours a month on our budget but it’s broken up into a few minutes a day so it doesn’t ever seem like a chore.

  8. Melissa @ BrokeTO

    Complicated, yes! But if it works for you, then that’s all that matters. I use Mint.com for my budgeting and love it. Is there a reason you don’t want to move to something like that? One of the things I like most about it is that it allows me to categorize and tag all of my transactions, so, like, groceries and entertainment and bills get categorized as such, but I can also tag individual transactions as, like, “business expense” or “planned spending” or “charity” or something like that, so I can track how that goes throughout the year. I find it really helpful! I also know I totally do NOT have the patience to do it your way in an excel spreadsheet. I probably spend the equivalent of 2 hours a month fiddling with Mint and making sure all my transactions are tagged correctly, but it seems like less of a time commitment when it’s just a few minutes a day, you know?

  9. MikeS

    Crazy is not tracking your spending at all. If your system works for you, then why change. I use Excel and spend a little time everyday updating my spreadsheet with purchases and assigning them categories. I have only 1 ING savings account, but I have a spot in spreadsheet where I break it up into various categories. My spreadsheet probably wouldn’t work for anyone else, but it works for me. 🙂

  10. Crystal @ BFS

    @Melissa, nope, I am one of those people – cash disappears from my wallet like it was made with invisible ink but credit card charges stare me down from the screen…

    @Everyday Tips, thank you for saying “precise” instead of “anal”, lol. 🙂

    @No Debt MBA, Mint is great but I need to physically enter every charge – like a penance…maybe it’s like my Catholic guilt leftovers from childhood or something…

    @Austin, all of our bills except the credit cards are paid automatically – I love it!

    BTW, I took a look at your site and like it a lot! I am a fan of the Roth IRA. I was going to leave a comment but Blogger comments are blocked at my day job…grrr….

    @Little House, if you try the bucket account system, let me know what you think. I like it alot!

    @Amanda, I tried Mint and it was okay, but I like entering every charge myself. It’s hard to give up any system after 5-6 years anyway. 🙂

    @Ashley, you have the closest system to the one I use that I ever heard of! Woot for another precise chick!!!

    @Melissa, I like my Excel sheet since it’s what I’m used to more than anything. I do get stuck in my ways…for what it is worth, entering the charges into Excel spreadhseet is only 30-40 minutes of my two hours – the rest is highlighting and moving money to and from where it needs to be at ING, lol.

    @MikeS, “My spreadsheet probably wouldn’t work for anyone else, but it works for me.” That described my spreadsheet too. 🙂

  11. Jenna, Adaptu Community Manager

    Thanks for being so transparent in what you do. Definitely need to check out setting up a ING account soon. I keep hearing great things about them.

  12. Crystal @ BFS

    @Jenna, you may want to hold off until we all find out if Capitalone will run things differently since they are in the process of buying ING Direct America.

  13. First Gen American

    How many special category buckets do you have? This is very precise. I haven’t been budgeting at all lately. I’ve had leftover money every month, so I guess that’s a good thing but I feel way out of control lately, not really knowing how much I’m spending. I’m thinking not a lot but my gut tells me that lifestyle creep may be creeping in slowly enough to sneak up on me.

  14. Crystal @ BFS

    @First Gen, I think I named them all, but let’s see. These are all of our ING accounts: checking, emergency fund, taxes, cash for investments, home and auto maintenance, vacation, hubby’s fun money, my fun money, and blogging income.

    I think that’s it…

  15. Commercial Capital Training

    Wow, very detailed! Great job with the multiple savings accounts too.

  16. Crystal @ BFS

    @CCT, thanks!

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    I haven’t set up a retirment fund / pention yet, although this is gonna be sorted in the very near future though.

    Have you got any more info?

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  21. Katie

    Wow, that seems like a very smart way to budget. I just opened up an ING account so I think I am going to open up the sub accounts and give that a try. Thanks for sharing.

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  26. Agwina

    Yes, thank you so much for breaking the process down for us and willing to share. What software do you use for tracking if any?

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