Personal Budgeting

I hear many remarks today about how hard it is to make ends meets. I don’t disagree, but if one used a system to at least project where you stand financially, maybe one could work towards making that situation better.

Years ago, I remember my parents and my relatives using a very simple system to pay bills. “The Envelope System.” In those days, the “working class” was paid in cash. Checks were non-existent, as were credit cards. It was a “cash society” for “blue collar workers.”

When it was payday, cash was allocated to the various envelopes: electric bill, water bill, groceries, etc. Surprisingly it worked! There may not be much left at the end of a month, but families survived.

In 1967, I was Controller at Fairchild Hiller’s Hagerstown, Md. facility. We had approximately 4,500 employees and we paid all of the employees, with the exception of management, in cash, every week. Over 4,000 cash envelopes had to be prepared weekly and distributed. Thank goodness we were able to convince the Union that we needed to pay, by direct deposit, into their checking accounts.

However, the majority didn’t have a checking account. Fortunately, we were able to arrange with a local bank, free checking accounts for all. Changing from a cash basis, to a direct deposit basis, released 25 employees to do other financial duties that weren’t being done.

Personal computers didn’t exist then. but they weren’t really necessary. I used a very simple format then, and now, to personally budget annually, and on a monthly basis. Now we have technology and Excell spreadsheets, so it makes it very simple.

On a piece of paper, put “Monthly Cash Budget” at the top. Then on the left hand side start with income, and list the cash income that you expect to receive that period and total it.

The next thing is to list expenses that must be paid. One normally has fixed expenses and variable expenses. Fixed expenses include mortgage payments, car payments, etc. Variable expenses include electricity, credit card payments, groceries, etc. When all of your expenses are listed you then total them.

When you subtract your expenses from your income you either have an excess of income or an excess of expenses. If your expenses equal more than your income, it is decision time. Can something be postponed? Do you need to consider a loan?

With this approach there are no surprises, and you might have time to change the situation. You should also include your bank account balances. This is a simple approach but one that allows you to plan in advance.

I also recommend a second column, “Paid” and a third column “Balance.” When you receive income or you pay all or a portion of your expenses, you put the amount down and subtract it from the budget and you get the balance. This helps knowing where you stand at any point in the month.

With Excell, this is easy, but you can also do this with just “old fashion pen & paper.”

Hopefully, this will help. It doesn’t matter where you stand on the financial scale, one needs to understand and know their own financial situation in advance.

Jess Sweely

Madison, Va.

September 23, 2024