StackBacks Automated Budget System www.stackbacks.com …

StackBacks Automated Budget System 
          www.stackbacks.com




            www.stackbacks.com    Page 1 of 10 
Premise 

This budget system is based on a simple idea... 

      You shouldn't have to think about your budget.  Figure your 
      budget out once, not constantly. I want to pay my bills on time, 
      reach my financial goals, and have money I can spend without 
      worrying about it. 


Budgets I've Tried 

I've tried a lot of different ways to budget my money.  I've used a 
ledger and I've used software (Microsoft Money and Quicken).  I've 
tracked my expense down to granular levels like movie rentals and 
magazines and I've spent carelessly.  I've used cash, I've used debit 
cards, and I've used credit cards.  None of it worked. 

I get lazy and I don't update the software or the ledger.  If I have a 
budget, I don't stick to it, and if I don't have a budget, then I feel 
guilty about not meeting nonexistent goals. 

So after some thought and experimentation I've come up with a 
budgeting system that meets my lifestyle.  It's simple.  Anyone can do 
it.




                           www.stackbacks.com                  Page 2 of 10 
Two Types of Expenses 

There are 2 types of expenses, those that are planned and those that 
are not planned.  Unplanned expenses are all lumped into a category 
called living. 

Living expenses are what you would use an allowance on, if you still 
got one.  The money you spend here is all variable, and dependent on 
the others.  If you spend $300 on dining out, chances are you don't 
need to buy any groceries.  Sometimes you'll spend $20 on movies, 
other times you'll spend $20 on drinks.  You'll get your haircut one 
week, the next you'll buy clothes.  I think it's useless to budget 
specifically in these categories, it's better to lump them all into one. 

Planned expenses are items you can easily budget.  These are items 
that can be scheduled and/or are about the same amount.  Your car 
payment is usually something that is the same every month, easily 
budgeted.  Your utilities may vary from month to month, but you can 
estimate about how much they'll be, and you know when they are due. 
These are either date specified or monetarily specified. 

Telling the Difference Between the Two 

Here is an easy way to tell the difference.  Ask yourself... 

      "Is this something I've agreed to pay, or is this something I 
      spend whenever I want?" 

      "Would I still need to spend this money if I was on vacation? 

Examples of Two Different Expenses 


Living                                Planned 
Gas                                   Rent 
Groceries                             Car Payment 
Dining out                            Cell Phone Bill 
Haircuts                              Auto Insurance 
Drinks                                Student Loans 
Clothes                               Utilities 
Events                                Budgeted Items 
Impulse buys                          Savings 
Movies                                Investments 
Books                                 Debt Reduction


                            www.stackbacks.com                  Page 3 of 10 
Setting Up the System 

Setting up your system is easy.  This assumes you already have a 
checking account.  If you don't, stop reading this and go open one. 

     Step 1 Figuring Out Your Expenses 
     Step 2 Opening a Second Checking Account 
     Step 3 Start Depositing Money Into the New Account 
     Step 4 Control Your System




                          www.stackbacks.com                Page 4 of 10 
Step 1 Figuring Out Your Expenses 

This is what requires the most effort.  You'll only need something to 
record with (a pen and paper, a text document, or a spread sheet) and 
a stack of your bills (or a computer if you pay them all online).  The 
information you want to collect for each bill is simple: the payee, the 
due date (just the day) and the amount owed.  I round up to the next 
dollar, but you can be as precise as you want.  You'll come up with a 
list like this (this is simplified)... 

Date                    Payee                    Amount 
1                       Rent                     600.00 
1                       Student Loan             74.00 
1                       Car                      380.00 
12                      Cellphone                55.00 
17                      Car Insurance            94.00 
                        TOTAL                    1203 

You now know approximately how much money you need to live off for 
a month.  Now it is time to figure out how much you need to maintain 
your lifestyle.  If you aren't currently budgeting your money, this is 
just a guess.  It's ok if you are not right. 

You guess that you could maintain your lifestyle at about $150 a week 
(your gas, food, entertainment).  So you give yourself that as an 
allowance to start. 

You should also double check to make sure you are earning enough 
money to cover this.  Let's say you earn about $2300 a month.  This is 
approximately the after tax equivalent of earning $40,000 a year. 

2300 income 
1203 budget 
600 (150 x 4) allowance 
$497 

For those paying attention that's $500 a month you can invest, save, 
or whatever you wish.




                           www.stackbacks.com               Page 5 of 10 
Step 2 Setup a new account 

The setup is easy and requires very little money.  Most banks will allow 
you to open a starter checking account with a $50 minimum, 
sometimes $100.  Most people already have one checking account so 
you're looking at a $50$100 startup cost, which you can spend almost 
immediately.  You probably have at least $50$100 in bills, so the 
start up cost is virtually nothing.




                           www.stackbacks.com                Page 6 of 10 
Step 3 Setup the flow 

This is another easy step.  This just means getting the money to flow 
in the right direction. 

Now this part is crucial.  The money you receive (paycheck) goes into 
your bills account.  Your bills account pays all your bills, and pays you 
your allowance.  If you put the money into your allowance account, 
you run the risk of spending money you don't have, or that's budgeted 
for something else.  So, the solution to this, is only give yourself 
money you can spend.




                           www.stackbacks.com                 Page 7 of 10 
Diagram of the Flow




                      www.stackbacks.com    Page 8 of 10 
Control Your System 

Keeping personal expenses under control 

There is one rule for your personal account, no checks or automatic 
debits.  Other than that, go buck wild.  Take out all the cash you want 
and swipe that card. 

The problem with checks is that they aren't automatically controlled or 
instantly withdrawn.  You have the ability to write checks your account 
can't cover, or you can write a check and then spend that money 
before it's cashed. 

If you follow that one rule, then you never have to worry about 
bouncing checks or having insufficient funds.  Your bank handles this 
for you.  Want to know how much money you have till your next 
check?  Just check your available balance. 

Keep Your Budget Under Control 

You need to do some calculations on a regular basis to make sure of 
two things. 

   1.  You're budgeting enough money for your expenses 
   2.  Nothing strange is being debited out of your account 

You're expenses will change.  You're utilities cost may go up in the 
winter or your auto insurance may go down.  Just run the numbers 
and make sure you're allotting the right amount of money. 

After you first setup your account I recommend paying your bills early 
and checking your accounts regularly crossing off bills as they get 
paid.  You don't want to incur any late charges or overdrafts for any 
mistakes.   After your system is setup I recommend you move to 
either checking after each pay period, or at the minimum once a 
month.




                           www.stackbacks.com                  Page 9 of 10 
Going Forward 

After a month or two if you're spending less than your making, you'll 
be accumulating money.  Now it's time to think about your financial 
goals and incorporate them into your budgeted expenses.  Do you 
want to save for a vacation?  Invest money in mutual funds?  Build a 6 
month emergency fund? 

The system is now in place for you to work in whatever way you want. 
Good luck!




                          www.stackbacks.com               Page 10 of 10