I've been wrestling with how to tell the world about my budgeting concept for more than a year.
This budgeting concept I HAD to live with my first year or two out of college - because I was only making enough money to BARELY cover my bills. But now I use it because it helps keep me in control of every dollar I spend, so I can ensure that I'm spending below my means, so I can be saving as much as possible for my goals...
I call my system... wait for it... "Budget By Paycheck... So You Don't Have To Live Paycheck to Paycheck."
When I graduated from college and earning a real income for the first time in my life, I was faced with my first real set of grown up bills. I needed to live on a budget. But... every system I knew about was a monthly budgeting system and I was paid every other week. I couldn't always count on getting paid on the same day relative to the 1st of the month when my rent was due. Or the 20th when both my car payment and student loan payment were due. Sometimes my paycheck would line up nicely, but not all the time. When I missed a car payment one month because the 20th came on a Wednesday, and I didn't get paid and couldn't afford to pay that bill till the following Friday, I had to make a change.
Out of necessity, I took a little notebook and wrote down the dates of my next several upcoming paychecks. Then I "assigned" bills to them.
For example, if my next two paychecks were Fri, 2/14 and Fri 2/28, I would assign my car payment and loan payment to the 2/14 paycheck and March's rent to 2/28. There was also the phone bill and other things I assigned. I also automatically assumed I'd spend $100 per paycheck on food (maybe it wasn't $100... but it's close enough to what I remember from 17 years ago) which became my limit on food per two weeks. I did something similar for gas. I planned out 2-3 months at a time, making sure that all of my bills were accounted for.
Once everything was accounted for, I could see (what little) I had left over for savings, entertainment, etc. It was following this system pretty religiously that I managed to start to work myself out of debt (yeah, in addition to graduating college with student loans, I took on a car loan right away, and I had built up several thousand dollars in credit card debt while I was a student) and live a slightly more stress-free life.
Fast forward something like 15 years later... or maybe it was about 4 years ago? Yes, 4 years ago. I had stopped using my system a long time ago. It wasn't intentional. It simply didn't seem necessary anymore. My income was 4 times what it was when I was a college graduate. My student loans were paid off, I had no car loan, no credit card debt, and a respectable amount of savings.
Then I bounced a check. (Or overdrew my checking account via too many debit transactions... semantics)
I freaked out. How was this possible? I'd been fairly responsible with my finances for a long time. And my income was 4 times what it had been when I was a college graduate. My student loans were paid off, I had no car loan, no credit card debt, and a respectable amount of savings.
Did I mention the freak out?
Well, I went back to the Budget By Paycheck system. This time, I did it in Excel instead of by hand. I've been doing it ever since!
When I set up the spreadsheet, I went out two years. Every year, I go out another full year (except this last time when I went out multiple years). It enables me to plan out irregular expenses... like that yearly membership to something, or yearly taxes, etc, so I'm not surprised when the time comes. It enables me to look at where I am with respect to the current paycheck and see if I have "extra" money for savings or entertainment or home improvements or anything else that is not a necessity.
I've been trying to figure out a way to educate folks on how to set up their own spreadsheet if they're not as handy in Excel as I am. If you're interested, let me know... that might provide me with some motivation.
But you don't need a spreadsheet. You only need a pen(cil) and a piece of paper to start "Budgeting By Paycheck" and getting your finances and spending under control.
Good luck, and comment if you have any questions!