Turn Your Budget Upside Down

  • Todd Colucy
  • May 5, 2013
  • 338
                        
My number one way to be smart with money is by telling it where to go before I get it. Yep, it’s my budget. I know most people don’t like the “B” word when it comes to money. So from this point on I’ll use the term spending plan. Having a written spending plan is helping me win with money. When I tell my money where to go before it hits my bank account two great things happen. One, I never seem to run out of money before my next paycheck hits and two, I’m able to put money into savings most months. My spending plan is simple and it runs from one paycheck to the next. The very first thing I suggest in setting up a spending plan is to turn it upside down. I realized if I don’t give and save, in that order, then write out the rest of my spending plan, those two most important aspects of my finances didn’t happen. This is why I put them first. It reminds me every time I get paid what’s most important in my life. When I didn’t have a spending plan there never seemed to be much money left at the end pay period to give or save. If I had money in my checking account right before my next pay date, that money got spent. Like clockwork, I use a zero based spending plan before each paycheck arrives. This process only takes me about 15 minutes. Here’s how it works. Starting with my fictitious net pay amount of $1,000, I enter this into my Google spreadsheet. Down the left hand side of the spreadsheet is all of my “spending categories”. The goal here is when I get to the bottom of my spreadsheet there are zero dollars left to give, save and spend. This means every dollar has a home on paper before I have access to the money. As my example shows, each time I type in an amount to the right of a spending category, the left to spend column decreases. For example, before I spent on paper $450 on my mortgage, I had $800 available. After my mortgage, there’s only $350 left to spend. On it goes until I get to the bottom of my spreadsheet and the left to spend column is zero. After I get paid and actually spending the money, I come back to this spending plan and type into the spent column. This helps me keep track of each category during the month. For example looking at the food line item, I allocated $125 and I spent $65. This leaves me with $60 until my next paycheck. I’d like to point out of few key things with my spending plan. It’s eliminated all of the money fights in my family. Everyone in my household has input into the spending plan before we get paid. It’s ok to raise one category during the moth as long as I lower a different category so that my bottom line still equals zero. Make sure you have a “blow” category in the plan. Things come up that weren’t anticipated and I use the blow column for this. Finally, any money not spent in a category before the next paycheck gets zeroed out and added to my take home pay then be allocated all over again. Give the upside down spending plan a try. It’s a freeing and empowering personal finance tool.


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