Tag Archive for system

How I Created a Budget: A Story Involving a Church Plant, a Spreadsheet, Cash, and Envelopes

Yes­ter­day, my post on 12 Tips for Sav­ing Money res­onated with you. Within 4 hours, this blog post quickly moved to fourth on my list of most-read blog posts. The three posts receiv­ing more hits than that one are these:

#1: Run­ning around Like a Crazy Woman: Why Less Is More
#2: Up In the Clouds or Down on the Ground: When Mar­riage Is Dif­fi­cult
#3: Why I’m Uncom­fort­able with Mother’s Day

Since you seem some­what inter­ested in money and how to save it, I decided to fol­low yesterday’s post with another post on this topic. Today, I’m writ­ing about how (and why) I cre­ated a bud­get and what it has done for me and my fam­ily. This process involves a story, a spread­sheet, cash, and envelopes.

Cash System

First, the story. In 2006, Shane and I lived in Gatesville, Texas. We had been mar­ried for four years, and Shane was a preacher at a church there. I had just fin­ished my Ph.D. in May of that year and began work­ing at Bay­lor in August of the same year. I was finally mak­ing a salary after so many years liv­ing off of Shane’s salary and a mea­ger grad­u­ate school stipend. We were excited about almost dou­bling our income and begin­ning the process of pay­ing off school loans and other debt we had accrued, includ­ing our car loan, loans on some appli­ances, and our mort­gage. Luck­ily, we did not have credit card debt. We only had one kid. We didn’t really need a budget.

Shane liked his job, and we loved that church (our first child was born there and those peo­ple and that church will always hold spe­cial places in our hearts), but we felt a desire to reach out to “non-church” peo­ple. Peo­ple who didn’t know about Jesus. Peo­ple who hated the church or who had been burned by “church peo­ple.” We wanted to reach out to, meet, and befriend the so-called “unchurched” or “dechurched.” We had heard about Mis­sion Alive, a church-planting orga­ni­za­tion, and became inter­ested in this thing called“church plant­ing. After many months of pray­ing and plan­ning and prepar­ing, we decided to move to Waco at the end of 2007 to plant The Grove Church.

Dur­ing the tran­si­tion time (or the “in-between” time as Shane called it in one of his blog posts at the time), from the time we decided to plant until we moved (which was about one year), I began to think seri­ously about our money. Like I said before, I’ve always been a saver, but now we were about to have to raise money for Shane’s salary and the church’s oper­at­ing expenses. This was not a part of the church plant­ing process that we liked. So much was unknown. We didn’t know how much money we could raise or how much money we would need to live on in Waco where we would soon be mov­ing to a new, big­ger, and more expen­sive house. We did not want to rely on the gen­eros­ity of oth­ers for very long (less than three years). In the worst-case sce­nario, I wanted to be pre­pared to live off my salary alone if we had to.

So, in late 2005 at the very begin­ning of our dream­ing and con­ver­sa­tions on church plant­ing (years before we took any action), I cre­ated a bud­get in an Excel spread­sheet. I looked online to deter­mine what cat­e­gories I needed for my bud­get. I decided on 18 cat­e­gories, rang­ing from House­hold Pur­chases, Sav­ing, and Gro­ceries, to Giv­ing Stu­dent Loans, and indi­vid­ual bills (cable, inter­net, phone, water, elec­tric­ity, etc.). I then input Shane’s salary (I was writ­ing my dis­ser­ta­tion and bring­ing home zero dol­lars) and divvied up the money accord­ing to his pay­check. I fol­lowed the bud­get for three months, all the while adjust­ing it accord­ing to what I really spent.

After I started work­ing and bring­ing money home a few years later, I decided to imple­ment a cash enve­lope sys­tem. Here’s what this sys­tem entailed: I wrote out all the cat­e­gories in our bud­get on var­i­ous envelopes (see pic­ture), which had been extended to about 35 dif­fer­ent items.

Some of the Budget Categories I Use

When we got our monthly pay­checks, I went to the bank and took out the amount of cash I needed for that month’s envelopes. I then put the right amount of cash in each of the envelopes. We used the cash until it ran out, and we were very dili­gent about not steal­ing from one enve­lope if we had run out in another one.

I took the envelopes with me when I shopped. I even found a nifty checkbook-size orga­nizer that had eight dif­fer­ent sec­tions in it to carry around the cash I needed when I shopped. The sys­tem worked great. It did take me a while to get “caught up.” What I mean by this is that before begin­ning the cash sys­tem, I paid my bills based on the pay­checks for that month. With the cash sys­tem, how­ever, I had to have enough money in the envelopes before I spent the money. This meant that I had to have money in the envelopes and the bank. It was a process to be able to save enough money for this to hap­pen, but it did.

Around this same time, I also decided to read Dave Ramsey’s The Total Money Makeover. I found many of his prin­ci­ples help­ful, espe­cially the ones about reduc­ing debt, namely pay­ing off the loans with the least amount of debt (which we did with my stu­dent loan, our freezer pur­chase, and two of our car pay­ments). I also liked his sug­ges­tion to have a $1,000 emer­gency fund for use in, well, emer­gen­cies. If you had to use the money, then your imme­di­ate goal was to replace it.

One note about the book: I did not imple­ment Ramsey’s prin­ci­ple of abstain­ing from giv­ing (or “tithing”, as he called it) until you are com­pletely out of debt. No mat­ter how much money you make or have or how much debt you are in, I think it’s impor­tant to give some of it away through­out the process of get­ting out of debt. If we all wait until we are com­pletely debt-free, we will NEVER give any­thing. Remem­ber the widow in the Book of Luke? She gave all she had, even in her poverty. One of my friends did recently tell me, how­ever, that he has since revised his stance on this issue (good!), but I’m not sure what he advo­cates now.

For sev­eral years, I car­ried around a lot of cash. Cash for gro­ceries, house­hold pur­chases, baby, hair­cuts, med­ical expenses, and a few other cat­e­gories. How­ever, this all changed two years ago when my hus­band and I went to see Wicked at Faire Park in Dal­las. While we were eat­ing lunch, some­one stole my big orga­nizer with all my cash right out of my purse (my driver’s license, social secu­rity card, and credit cards were also inside–ugh). I lost thou­sands of dollars.

I thus dis­cov­ered a flaw in the sys­tem. A HUGE FLAW.

I began look­ing for other ways to uti­lize this sys­tem. I decided to still uti­lize the cash sys­tem but to do so with­out hav­ing to take out so much cash each month. I decided to orga­nize it all in a spread­sheet and to just keep track of it elec­tron­i­cally. It has worked even better.

Today, our bud­get con­tains 57 items in the list. Shane thinks I’m crazy for how detailed it is, but it works for me (and him, I think). I am con­stantly adjust­ing the items and the amount des­ig­nated to each item because dif­fer­ent expenses come up as your sit­u­a­tion changes.

And what have been the results? We have a bal­anced bud­get. I don’t stress over money. I adjust the bud­get when nec­es­sary. We have paid off or got­ten rid of at least seven loans (2 school loans, 2 car loans, 1 fur­ni­ture loan, and 2 large appli­ances). We have not accrued any more debt. We now save in advance for cars rather than pay­ing for them after we buy them. We only spend what we have. We have gained finan­cial peace.

I want to leave you with a list of five bud­get cat­e­gories that have helped me in one way or another. These may not be the typ­i­cal items you will include in your bud­get, but they have been help­ful to me so I’ll share them with you.

1. “School Fees”, one enve­lope for each child you have (this includes teacher gifts, school sup­plies, school pic­tures, field trip money, t-shirt money, and all those other expenses that come up once kids start school).

2. “Extracur­ric­u­lar Activ­i­ties.” Includes tee-ball and other sports for your kids, as well as piano lessons, swim lessons, or art lessons. It can also include art, cook­ing, or ten­nis lessons for your­self (This cat­e­gory could also include the gym, but I typ­i­cally have a sep­a­rate item for it when I have been a mem­ber of the gym since it’s a recur­ring fee). You could also include going to the movies or other fam­ily activities.

3. “Babysit­ting.” If you want to have a Date Night with your sig­nif­i­cant other, or if you are a sin­gle mom/dad and want to go out at night, this enve­lope is a MUST. Sav­ing for a babysit­ter is also good incen­tive to actu­ally go on the date. You already have the money saved, so go spend it.

4. “Christ­mas.” I have a “Gift” enve­lope for birth­day par­ties, hol­i­days, and other spe­cial occa­sions, but I have found that I am more con­scious about how much I spend on Christ­mas and what I buy when I have a spe­cial enve­lope des­ig­nated for Christ­mas. Begin­ning in Jan­u­ary, I start putting money in this enve­lope. By the time Christ­mas comes around, I know exactly how much I have to spend, and it is there before I spend it. No wor­ries. No fuss. I have also noticed that I spend much less than I did before. It’s not because we don’t nec­es­sar­ily have the money to spend; it’s just that I became aware of how much money I spent on Christ­mas and real­ized that it was way too much…and not even what Christ­mas is about for me any­way. If you don’t cel­e­brate Christ­mas (or if you don’t spend enough to war­rant a sep­a­rate enveloped), then maybe you can think of a dif­fer­ent occasion.

5. “Work Expenses.” I have two sep­a­rate Work envelopes–one for Shane and one for me. We both have expenses for our jobs (most of them are for books we need to buy). It’s impor­tant to item­ize all of these small items so that you don’t mess up the budget.

Thanks for reading.