Budgeting for Dummies part 3

     Now you've made a list of expenses, and you've set aside specific amounts for things like groceries, eating out, gas, clothing, and other expenses.  You've lined your bills up and decided when they will be paid. Good work!  You're on your way!
     Let me take a minute to discuss static expenses versus variable expenses.

STATIC EXPENSES
     Static expenses are those that do not change from month to month (or only change very slightly).  These expenses are things like your mortgage payment.  That's not going to really change from month to month.  Your car insurance payment, your life insurance payment, the cost of your home security system, your Netflix payment, gym membership, etc., those are all things that don't change month to month.  For things like these, sometimes it is best to have automatic drafts as your payment style.  That way, since they're the same every month and they generally come out at the same time every month, you can just have them done and over with.
     However, that doesn't mean that you should do that with everything.  It's going to depend greatly on your personality.  My wife (she handles the actual paying of the bills mostly) prefers to have some things with either a written check or a manual online payment.  She likes having control that way, which is fine.  We have several of both, autodrafts and manual payments for static bills.  Find what works best for you and your spouse (or just you if you're single).
   
VARIABLE EXPENSES
     Variable expenses are things that can and likely will be different every month, especially since you have direct control over them.  These include groceries, eating out, gas (this may seem like a static expense but trust me, it's not), entertainment, blow money (which will have it's own paragraph in a minute), clothing, cleaning supplies, etc.  These are all things that you directly control.  Variable expenses are often the source of the most conflict because it can be hard to agree how much needs to be in each category.
     Since you have the power to limit these expenses, you also have the power to overspend in these categories as well.  If you (as a couple) decide that you're going to spend $350 this month on groceries, you need to stick with that or else you've blown your budget.  A lot of variable expenses are best paid for in cash.  Let me repeat that, in cash.  We do this by using an envelope system.

The Envelope System
     The envelope system is a very old, very effective way to keep your expenses within your budget.  If you and your spouse agreed to $350 for groceries, then at the beginning of the month you take out $350 from the bank, put it into an envelope marked "groceries."  With that done, you need to make sure that only groceries are bought using that money and that no groceries are bought without that money.  Yes, that means if you get all the way to the grocery store and you forgot the envelope you need to turn around and go get it.  The reason is this:  You can't overspend with cash.  If at the end of the month there is no money left in the grocery envelope, you eat leftovers or canned goods (because we ALL have canned goods sitting in our cupboards we're not eating, don't lie to yourself).
     This is GREAT for groceries, eating out, blow money, entertainment, clothing, birthday presents, and more.  My wife and I use this system for many things.  Gas is a tricky one, though, because we have a baby girl who sits in the car seat.  We don't use cash for gas for that reason, because we're too lazy to get the baby out of the car (especially if she fell asleep) and go inside to pay cash.  We use a debit card for that.
     In fact, for anything you don't use cash for, you should be using your debit card.  This means the item will show up on your bank statement soon enough and you can keep track of how much you've spent.  At the end of every month, you should be reconciling your budget, and I'll have another blog post for that one.

Blow Money
     Let me talk just for a minute on something near and dear to my heart: blow money.  Also known as burn money, mad money, fun money, etc.  If you are on a serious diet, you have to have a meal each week that lets you eat something bad for you, otherwise you'll go insane.  It's the same with money.  You have to have a little bit of crazy in your budget to maintain sanity.  Dave Ramsey says blow money is in the budget "in memory of your former plan."  It's to give you some money to spend on impulse buying or on snacks/extra food or on that new book you saw on Kindle or whatever.  If you set aside this money every month (not too much, mind you) for the specific purpose of blowing it, then you give yourself some freedom to be a human being.  You cannot get mad at your spouse for spending her blow money on whatever she wants, because that's what it's for.  Your spouse can't get mad at you for the same reason.  It was an agreed on item in your budget.
   
     That's it for now, friends, but look for my next post to talk about reconciling your budget and a future post to deal with the Biblical rules for budgeting.  Leave me some comments below to let me know what you think and ask any questions you might want answered!
     In the mean time, just remember that this isn't rocket science, folks, just Common Cents.

-Heath