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Most people have a budget, and it’s one of the first things personal finance advisors recommend setting up. Budgets are good, they show you how much you’re spending and where it’s going. But falling off a budget is probably the first sobering thing that happens to people when they begin to take control of their finances. It’s no fun, but it happens at the beginning of nearly EVERY budget plan.

Many people equate being on a budget to being on a diet; At first, you design a strict, no-nonsense list of things you’re going to pay, and that accounts for EVERYTHING. This is where the ‘falling off the budget’ first occurs. The first month’s budget looks perfect on paper, but can’t deal with reality. (You take the kids to ONE extra movie and blow the entertainment budget, so since it’s already blown, what’s one more DVD rental? Or ANOTHER movie? Or, or,…) Soon, despair and a feeling of guilt and failure set in as you assess the ACTUAL damages you’ve caused the budget. ("Did we REALLY need that extra manicure last week?", or "But I was planning on getting new seat covers for the truck for six months. Why NOT get them now?")

Whatever the cause, the first few months of a budget, usually end in various levels of disappointment and/or disaster. Sound like any diets you know??

My Budget

After going through the same thing a couple of times, I’ve decided to attack it in a different way. I’m what Dave Ramsey would call the ‘geek of the family’. I’m a guru at Quicken and have spreadsheets flowing through my veins. I can tell you how much we spent in 1997 for coffee in the month of Oct ($17.33 if you’re curious). But this still doesn’t give me the ability to put together a budget.

Instead, I use Quicken to plot out my NECESSARY BILLS for YEARS.

Quicken allows you to set up automatic payments (I use Bank of America, but it should work on your bank too). So to set up my pseudo-budget, I take the credit card with the smallest balance, and enter the minimum payments until it’s paid off. Sometimes this can go for years. I then do the same thing with the next credit card, and so on until I have a list of all credit cards and loans.

By adding up these payments, it allows me to find our household ‘Nut’.

The Nut, is the ABSOLUTE minimum amount of money needed to pay all the bills. If not already included, it includes the ‘four walls’ bills; Mortgage/Rent, utilities, food, and transportation/car payment).

Keep Following Me

Next, I use Quicken’s built-in pay tracker to set up my salary. That gives me a picture of the revenue stream I ‘expect’ to be coming in far into the future. (I don’t take into account raises, bonuses, or other things that might happen, just things I KNOW will happen).

After that, it’s just a matter of looking at Quicken’s trend chart and making sure that more INCOME than OUTGO is maintained.

Now My Fun Part

Since I am the geek, my enjoyable part is running the numbers after each payday. Here’s the process.

1. Pay all bills due. (Both investments and bills are automated
2. Figure remaining bills that will come due before next payday. Put aside money for them.
3. Put aside budgeted amounts (food, entertainment, etc). This is mostly deposited in my wife’s account, but I keep some for emergencies/spending money too.
4. Pay extra on the highest-interest bill on the list!!!
5. Re-calculate remaining balances on bills by subtracting the balance from the end of the bill I just paid. I leave everything the same (all the set-up payments) except for the last one. I start there and subtract. If it’s been a good month, it can shorten the bill payoff time by a month or two.

It’s not your most convenient, or easiest way to budget, but I get a kick out of it because EVERY MONTH I get to shorten the number of payments on my outstanding bills. That keeps me motivated and gives me incentive to make them go away faster.

Geeky, but fun.

What is your favorite budgeting trick to keep you motivated and on track? Leave us a comment and let us know!

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