Budgeting Tips -- Watching Your Money

I was asked the other day how my husband and I budget. I chuckled a little and shook my head…budgets have to adjust as situations change and kids come along and as kids get older. There is no set formula for the perfect budget. But if 20 years of marriage and continuing to raise six kids qualifies me to give some budgeting advice, then here are three tips I’d recommend:

The Step-Down Principle: This idea comes from Dr. Alena C. Johnson and it is brilliant. To quote Dr. Johnson, “As a financial counselor and educator, I have used what I call the “step-down principle” to help many people successfully reduce their expenses. To use the step-down principle, imagine a staircase. Think of a purchase you will be making and list the most expensive way to purchase that item on the top step. Then go down a step and list the next most expensive way, continuing down until you have the least-expensive option on the bottom. For your food budget, for instance, the top step might be a restaurant. Subsequent steps might include a fast-food outlet, frozen or already prepared food from the grocery store, mixes from the grocery store, and cooking from scratch. Decide which step you are most likely to use. Then see if you can step down one or more steps. The savings can be tremendous!” (link to full article) (link to a pdf view of the idea)

I think about and use this principle so often is has become a part of me. For example, my family of eight was going to be traveling and would need to each lunch. Here were my step-down options…

Top step: Go eat at a fancy restaurant (Fun, but out of the question. 🙂 )

Step 2: Go to a fast food place and purchase meal deals

Step 3: Go to fast food place, purchase only the sandwiches and take water, apples and chips

Step 4: Buy lunch meat, hamburger buns, water, apples, and chips beforehand and take a cooler

Step 5: Make peanut butter and jelly sandwiches

Step 6: Take muffins and apples for a snack and eat when we get home.

Well, this time Step 4 won out, because lunch meat was on a good sale and so were the chips. I fed my family of eight lunch for less than $9…much cheaper than feeding 4 teenagers, 2 adults, and 2 kids fast food…but more expensive than just taking a loaf of bread, peanut butter, and jelly.

(Link to a fun post on how to pack food for adventures.)

Track Your Pennies: For one month use a check register and write down each transaction and every bit of cash spent. Keep the receipts and review what your money is spent on. Then sit down with your spouse and discuss your findings. Are there ways to cut back? It is eye opening to track every penny. The amount of milk that my household drinks would amaze you! But seriously, are you in the habit of getting a soda and a snack at the gas station? Each money choice quickly adds up.
Food Account: We honestly have a checking account that is only for food. Having a firm amount of money to spend helps me make wise choices. Each time my husband gets paid a certain amount of money goes into the “food account”. That is the only money I use on food. If we choose to eat out, we have to make cheaper choices on some of the other food for the month.