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A Proven Budget System To Transform Your Money Habits

How-To-Master-Financial-Alignment:-A-Proven-Budget-System

January 25, 2024

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In January, I’ve been dedicating the podcast to sharing the various strategies I implement in my life to gear up for a new year. Today’s focus revolves around a crucial aspect: enhancing budget management. When it comes to finances, I’ve developed an effective system that stands out as one of my favorite marriage systems. However, it’s worth noting that this system isn’t exclusive to married individuals; singles can benefit greatly as well. In fact, I often wish I had employed this approach when I was younger.

Many of you have raised questions about my financial practices and our journey towards financial stability. Today, I’ll provide some insights into how I arrived at my current financial system and the steps I took to get here.

Listen Below For The Entire Episode On The Systemize Your Life Podcast

Unleashing The Power Of My Proven Budgeting System

Let me be upfront about this – you can access the spreadsheet, along with comprehensive instructions explaining the entire process through my website. The spreadsheet is equipped with locked and loaded formulas, and I’ll walk you through how to seamlessly integrate it into your life. You can take the insights from this blog post and dive right into action. You can start implementing them ASAP by heading to https://chelsijo.co/syl.

It’s a fantastic feature and bonus that comes with your VIP access to Systemize Your Life, which adds an extra layer of excitement. If you have any questions, don’t hesitate to shoot me a DM or drop it in the Facebook group. I’m always thrilled to chat and assist you on your journey.

Navigating The Dating Phase

Today, I want to delve into three crucial steps that can significantly elevate your financial harmony in 2024, helping you save more and argue less. Let me share a little backstory – when Blaine and I were in the dating phase, our time together often felt like a marriage interview. It might sound amusing, but it was a wise approach he took, given the circumstances. At that time, I had a daughter, and Blaine, who had never been married, was approaching the situation thoughtfully. This was a stark contrast to my past dating experiences, and it struck me how serious he was about our future, as we rightfully should be.

Looking back, hindsight is 20/20, and I recognize the significance of the financial conversations Blaine and I had during our dating phase. It’s a lesson I’m eager to impart to my kids someday – emphasizing the importance of caring about substantial matters while dating. When Blaine asked me about finances, it was an eye-opener. It wasn’t in a negative way, but rather, it revealed that he already had his financial affairs in order and demonstrated a remarkable level of wisdom in managing money. In all honesty, I had no shame in admitting that I didn’t have my financial act together. At the time, spending money brought me joy, and I wasn’t particularly inclined towards saving. The concept appealed to me, but putting it into practice was a different story.

Welcoming Financial Partnership And Embracing Shared Responsibility in Budgeting

He approached the topic with clarity, asking, “How would you feel about me managing the money?” My immediate response? “I would love that. It’s blissful. Take all my money, do whatever you want with it.” Well, not exactly those words, but the sentiment was a resounding “Heck yeah!” This conversation marked the beginning of my journey down this financial management path.

While I was all for him taking the reins, my systematic nature kicked in. Despite trusting him with our finances, I still wanted to understand what was happening. When I began managing the finances for my own business, I initially approached it haphazardly. However, as the business grew and became more lucrative, I realized I couldn’t trust myself to handle it without proper knowledge. So, I made it a point to learn and master the art of financial management.

Budget Bliss: Transforming Your Financial Habits As A Couple

I delved deep into understanding and mastering the entire “Profit First” system. If you’re running a business, I highly recommend checking out Mike Michalowicz’s book, which outlines the Profit First methodology—a system that revolutionizes how you organize your finances.

While I was immersing myself in learning the Profit First system, Blaine and I were navigating the intricacies of managing our finances. What became abundantly clear is that the dynamics of finances shift dramatically when transitioning from a single, childless individual with the capacity for ample overtime work to being a husband and a father. Suddenly, every dollar seemed to be earmarked for the noble cause of nourishing our hungry children. The challenge lay in balancing the financial needs of a wife who enjoys indulging in feminine luxuries, appreciates girly things, and shares a love for play and the enjoyment of life.

Navigating Financial Harmony In Your Marriage Through Budgeting

The landscape of budgeting underwent a profound transformation when we found ourselves juggling not just one but two debit cards, along with credit cards. Suddenly, expenses that once amounted to a modest $500 for Christmas ballooned to a staggering $2,500. The dynamics of budgeting had taken on an entirely new complexity. Despite the intensified financial responsibilities, one aspect remained steadfast—we never found ourselves embroiled in arguments over finances. While other topics may ignite heated discussions, money management has consistently been an area where Blaine and I effortlessly engage in open conversations. This subject became a focal point during every marriage retreat, a topic we delved into until we unearthed a resolution, until we decoded the intricacies of financial harmony.

Our approach to finances has evolved over the years. What was once a recurring topic during our annual marriage retreats has now become a dedicated session in January—a time when we meticulously review and plan. Today, I’m sharing this insight with you, shedding light on the strategies that have not only kept financial disagreements at bay but have also fueled our commitment to saving more. The essence lies in alignment—ensuring that both you and your spouse are on the same page when it comes to financial goals. It’s a harmonious synergy that propels you towards saving more effectively. Blaine and I continually ask ourselves, “How can we save more money? What are our intended expenditures, and what are we committed to avoiding?”

Merging Dave Ramsey’s Budgeting Wisdom With Profit First Efficiency

Our financial journey has been shaped by blending the wisdom of two prominent figures—Dave Ramsey and Mike Michalowicz. Drawing inspiration from Dave Ramsey’s traditional paper envelope system and Mike Michalowicz’s Profit First methodology, we crafted a unique and efficient system. Gone are the days of physical envelopes; instead, our electronic system automates the process. Upon entering our income, the system calculates the percentage to allocate to each category, streamlining our financial management. We’ve embraced a modern approach with separate debit cards for specific purposes—whether it’s for the kids or personal expenses, each card is pre-set for its designated use.

Eliminating the surprise of overspending, our system ensures a transparent view of our budget. No longer do we find ourselves exclaiming, “We spent $300 at Target on kids’ clothes?” Instead, our budget is clearly defined, and I know the allotted amounts for various categories. This seamless process is a result of a structured meeting we have. In this blog post, I’ll guide you through a practice that is beneficial whether you’re navigating finances with your spouse or managing them solo.

A Proven 3-Step Budgeting System To Save More And Argue Less In 2024

Let’s start with the fundamental aspect – having a budget. If you find yourself in a situation where money flows into a single account, and you’re uncertain where it goes, lacking a budget might be the root cause of stress. Establishing a budget is crucial to gaining control over your finances. There are various types of budgets available, and selecting one that aligns with your preferences and lifestyle is the initial step.

Before delving into budget specifics, it’s vital to initiate a crucial and potentially enjoyable meeting. My aim today is to guide you through the three steps that will make this meeting successful. Recognizing that not every spouse may be fully on board with this process, I’ll also share tips on how to facilitate the meeting. Additionally, I’ll provide insights on steering clear of financial arguments and fostering an environment that allows for effective money-saving strategies.

A Simplified Guide To Scheduling Your Essential Budgeting Meeting

Addressing the potential hurdles to scheduling this essential meeting is crucial. Whether it’s reluctance from one or both spouses, childcare concerns, or other obstacles, making this meeting a priority is key. I understand various excuses might arise, but finding solutions and making it work is essential. We’re not talking about a grand marriage retreat setup here; simplicity and commitment are key.

Blaine and I initially thought about dedicating a full two days to this process. However, even if the idea of spending six hours on it might seem intimidating, the reality is that it doesn’t have to take that long. The key is to get into the nitty-gritty details, examining every single dollar you plan to spend and truly understanding your financial landscape.

Scheduling the meeting can be as straightforward as finding time at the end of the day, but it’s essential to consider your and your husband’s energy levels. If fatigue tends to lead to grumpiness or fussiness, it might be wise to opt for a weekend when you can secure uninterrupted time without the kids. Ideally, aim for a four-hour session, but if that feels challenging, you can break it down into two-hour segments, possibly spanning three sessions.

While six hours might seem lengthy, it offers the advantage of a more relaxed pace. This extended time frame allows for breaks, meals, and a more leisurely atmosphere, transforming the meeting into a unique relationship-building experience. It provides ample time for connection and bonding, creating a foundation that will support your financial endeavors throughout the year.

A Simple Guide To The Essential Components Of A Budget

Setting up a budget can feel overwhelming, especially with the myriad of tools available. Having experimented with various systems, I’ve distilled the essentials into three simple yet crucial components. Whether you opt for the tools within Systemize Your Life or choose another platform with advanced features, these foundational elements remain constant. The simplicity of these three components ensures that the process, while requiring some effort, remains straightforward. There’s no need to over complicate matters; let’s dive into the fundamental elements you need.

Securing undivided attention for your budget meeting is key, and you should do whatever it takes to create an environment conducive to focused discussions. Once you’re in that space, let’s delve into the agenda. First and foremost, right at the beginning of the meeting, or even before if you prefer, there’s a crucial step to kickstart the session. This step might vary depending on your relationship dynamics and preferences.

Navigating Respect And Conflict In Your Budget Meetings

First and foremost, I want you to jot down the initial point: establish ground rules for respect and conflict resolution. This is particularly significant in my relationship with Blaine. Both of us possess strong wills, formidable opinions, and a tendency to interrupt. Over time, we’ve had to actively train ourselves in the art of handling conflicts with respect. This lesson has been gleaned from various experiences, and it’s a topic we revisit every time we convene for a meeting aimed at achieving specific goals.

Moving on to the first step: establish ground rules for respect and conflict resolution. You are the expert on your marriage dynamics, understanding the nuances that define your relationship. Acknowledge whether active listening, assertiveness, or restraint is necessary for effective communication. Kick off the meeting by expressing your commitment to respecting each other’s perspectives, ensuring a conducive atmosphere for productive discussions. Make it clear that you’re willing to wait your turn to speak or adopt any other practice that facilitates open and respectful dialogue.

Analyzing Financial Patterns That Unveils Insights

Now, onto the second step, which is where the real work begins. To kickstart your savings and cultivate a more synchronized budget, scrutinize the past three to six months of spending across specific life categories. This entails diving into your bank statements and meticulously examining your financial outflows. Generate a report from your bank, print it out, and embark on a detailed analysis of your expenditures. This step provides invaluable insights into your financial patterns, paving the way for informed decision-making and strategic planning.

Exporting the data into a spreadsheet is an option for those with a knack for organizational wizardry. You can arrange the information by categories and dates, unraveling a comprehensive view of your financial landscape. However, the simplicity of your bank’s filtering tools can also suffice. While there are applications that enable precise categorization and labeling, your bank statements may already provide a basic breakdown, designating expenses like gas, groceries, and more. The goal here is to gain granular clarity on your spending habits, paving the way for constructive discussions and targeted improvements.

Printing out the last three months of your bank statements offers a simple and effective approach. However, even if you can manage just one month, it puts you in a favorable position. The more extensive the timeframe (up to six months), the more precise and comprehensive your data will be. Optimal accuracy often comes from examining a span of three to six months, shedding light on patterns and trends in your financial behavior.

Food And Spending

Let’s breeze through the categories. Begin by identifying and highlighting items falling within these specific categories. Under “food,” include everything related to groceries, dining out, and any other food-related expenses. For “spending,” carefully consider where items like eating out should be placed, whether it aligns better under “food” or “spending.” This categorization depends on your perspective; for some, dining out is a social activity rather than a direct food expense.

Health And Fitness/Home/Kids

Now, let’s delve into the third, forth, and fifth categories. First is health and fitness. This includes expenses associated with gym memberships, supplements, protein powders, and other health-related beverages. Moving on to the “home” category, encompass all expenditures related to your residence. Next, under “kids,” concentrate on specific expenses pertaining to your children, such as violin rentals, clothing purchases, and any school-related needs. This detailed breakdown offers a comprehensive view of your spending patterns across essential aspects of your life.

Celebrations

The next category to explore is “celebrations,” which can be an exciting but significant area of spending. For a comprehensive understanding of this category, review your expenditures related to holidays, anniversaries, and other celebrations throughout the year. If necessary, check credit card statements in addition to bank accounts to capture a complete picture. You may opt to break down this category further, itemizing expenses for specific celebrations such as Christmas, Easter, and individual birthdays for a more detailed analysis.

During my initial assessment, I discovered that I was allocating a significant amount—around $500 to $800—on seemingly straightforward birthday parties. This realization prompted me to reevaluate and decide that such extravagant spending was not sustainable. Engaging in this exercise proved to be a valuable eye-opener.

Transportation

Now, moving on to the “transportation” category, scrutinize all expenses related to your vehicles. This includes items like gas, car-related maintenance, insurance, car payments, and any other relevant costs associated with your means of transportation.

Debt/Pet/Utilities/Giving

Now, let’s delve into the category of “debt.” Account for any payments you’re making toward reducing outstanding debts. Additionally, if you allocate funds to savings, record that specific dollar amount. If you have expenses related to pets, such as vet bills or pet supplies, include those costs. Next up, we have “utilities.” This encompasses miscellaneous expenditures like Amazon or iTunes purchases, along with any other miscellaneous charges that may appear in your financial records. Finally, if you engage in giving or charitable contributions, document the dollar amount allocated to this category.

A Collaborative Or Solo Analysis Before Your Budget Meeting

This is a task you can tackle independently before your joint meeting, especially if your spouse is less enthusiastic about the process. When Blaine and I undertook this exercise, we divided the responsibilities, with each of us handling specific categories. This preparatory step made our actual meeting more efficient, as we had already tallied and highlighted the relevant expenses over the course of a few weeks, given our separate categories we were working on.

If one of you is more inclined or enthusiastic about handling this task, let the person who is more into it take charge. Divvy up the categories based on your strengths or interests. This exercise, whether done individually or collaboratively, promises to be an eye-opening experience, paving the way for significant and necessary changes in your financial approach this year.

Crafting A Purposeful Budget By Aligning Income, Expenditures, And Strategic Percentages

The next step involves taking that information and bringing it into your meetings. With the data in hand, your discussions over coffee or dinner can revolve around deciding which expenses should be trimmed from the list. Evaluate your monthly income against your outgoing expenses and identify the necessary alterations. This is the point where you construct your budget, calculating the total amount required to meet the expenditures in each category.

Next, it’s time to work with percentages. Using 100% of your income as the base, the spreadsheet I use simplifies this process. Enter all your expenses in each category, and it automatically calculates the monthly amount for each category over 12 months. If the total exceeds 100% of your income, adjustments must be made—either by cutting spending, increasing income, or a combination of both.

And if there’s a surplus—for example, if you receive $1,000 monthly but only need $800 according to your percentages—you have an extra $200. This surplus can be allocated to various purposes, whether it’s paying off debt, boosting savings, increasing your giving, or contributing to additional accounts. The use of percentages makes this process incredibly efficient and flexible. But you can also do it with a set dollar amount. We need $300 a month for this. We need $400 a month for that.

Transformative Financial Practices By Designating Sections For Budget Adherence

The simplicity of having designated cards for specific categories is truly remarkable. It provides a clear and tangible way to adhere to your budget. A heartwarming moment occurred recently when Bailey and I were engaging in pretend play about selling food at a restaurant. She insisted on bringing her play kitchen along to her grandparents’, and as we were about to leave, she reminded me, “Wait, Mom, I need my food card.” It struck me that my daughter’s understanding of transactions revolves around the concept of designated cards for specific purposes. 

This is a testament to the effectiveness of the system we use. I take pride in the fact that this financial structure has become second nature to her. Personally, I use a wallet with separate slats for different categories like the food card, transportation card, or kids’ card. It’s a practical and visually clear way to manage and stick to our budget. Just this weekend, I used the kids’ card for a sudden growth spurt in their clothing needs, which I have been building savings on that designated card.

How Strategic Planning And Alignment Transform Budgeting

The beauty of this system is that it eliminates the need for constant financial guesswork. Instead of wondering, “Can I afford to buy clothes this month?” I have a predetermined understanding that every six months, my kids experience a growth spurt, necessitating a clothing purchase of around $150. This knowledge empowers me because I’ve already allocated the funds for such occasions. The goal for you is to reach a point where these financial decisions become second nature, providing a sense of clarity and control over your budget.

Having alignment with my husband has been a game-changer in our ability to save more money than ever before. It’s a wonderful achievement and an inspiring goal for you to pursue. Realistically, building this financial synergy takes time—we’ve been refining our approach for years. However, what can change overnight is your shared commitment to learning and growing in this area. You can start making immediate strides in understanding your spending patterns and developing better habits with your debit cards. It’s about the journey of progress, not perfection.

“It’s about the journey of progress, not perfection.”

Breaking The Credit Card Cycle: A Strategic Approach To Financial Planning and Stability

A significant realization that prompted us to establish a budget was the cycle of credit card use. We found ourselves spending on holidays and then scrambling to reimburse ourselves. It felt counterintuitive—we had the money; why weren’t we prioritizing saving for upcoming events? That shift in perspective led us to prioritize setting money aside gradually, ensuring we had funds ready for the next Christmas, holiday, or any future expenses. It’s about proactively allocating resources instead of playing catch-up.

Planning for routine expenses like an oil change is part of our newfound financial strategy. We recognize that certain costs, such as regular vehicle maintenance, occur predictably. Rather than facing these expenses as sudden financial burdens, we break down the costs over the course of the year. By setting aside small, incremental amounts regularly, we ensure that when it’s time for these anticipated expenses, the necessary funds are already available. It’s about embracing foresight and intentionally preparing for known financial commitments.

The foundations of our financial approach draw inspiration from renowned financial gurus like Dave Ramsey. While I don’t claim to be an expert like him, I can attest to the effectiveness of the system we’ve devised over the past eight years. The initial three years were a learning curve, filled with challenges as we honed and refined our approach. However, the past five years have showcased the stability and support this system provides. My hope is that sharing our journey inspires you to take actionable steps in shaping your financial future.

Wrap Up

Dare to embark on a financial adventure, forge a new system, and witness the transformative impact it may have on your life. Beyond the potential financial benefits, such a journey might even strengthen the bond between you and your husband. As you explore this approach, I’m excited to hear your experiences and insights when you share them within our vibrant Facebook community or come over and visit me on Instagram.

Thanks for joining me on this financial exploration, and I eagerly anticipate the stories that will unfold as you embark on this journey.

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