How I did it: I have used this plan for several years now.  It is very simple.  Financial software is nice, but not required.

1. List all of your bills and when they are due.
2. If your family has multiple paydays, figure out which payday to pay each bill each month, taking into account when it is due and how much you will need to pay out of that check.
3. Figure out how much money you need for necessities between each payday.  This may vary if, for instance 1 person gets paid monthly and another gets paid weekly.  A certain amount a week works well.
4. Figure out a realistic spending allowance for nonessentials.  As in #3, this may vary and a certain amount a week works well.
5. Decide what to do with extra money.  Paying off debt or putting it into an emergency fund or investments are good things.
6. On payday, add up all of the regular bills you always have for that pay period.  Add any one-time bills.  Add in your amount for necessities.  Add a buffer amount just in case. Then add in your spending allowance. 
7. Add it all up and compare it to the money you have in your account (not just the paycheck). If you have money left, then that should be allocated to what you decided in #5.  If you don't have enough money, then you will have to whittle down your amounts until you do. 
8. Pay all of your bills and transfer all of the other money to pay off debt or savings or so all you have left in your account is the money for essentials and a buffer. It is helpful to have another account for your spending allowance--or you can just use cash.
9. As you spend money, be mindful of that amount you have for essentials and for the amount you have for your spending allowance.  Before the money is gone, stop spending.
10. On the next payday, start all over, carrying over your buffer amount and any money you haven't spent on essentials, adding it to the paycheck amount. 

 

Lessons & tips:

• Financial software is helpful, but not required
• Make use of your bank's online bill-paying features to simplify and speed up bill-paying
• Open different bank accounts for bills/essentials and for fun money
• If you use credit cards, pay them off every payday.  Don't accrue more debt!
• When bills come in, decide what payday to pay them on, write it on the envelope, and put them all in the same place.
• Have some goals for the money you save.  It really helps to feel good about saying "no" to things that don't fit in your plan.
• Live below your means.

Resources:

• The Motley Fool www.fool.com
• The Living Below Your Means Message Board at the Motley Fool: http://boards.fool.com/Messages.asp?bid=100158
• Microsoft Money
• Bill paying service at my bank
• Transferring money online to multiple accounts
  

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Aug 19, 06:33PM PDT | 0 comments | 4 cheers