It seems like we've always struggled with money. I balanced our checkbook once a month when our statement came in, but we were kinda clueless the rest of the month.
Then in January 2011 the S*@T hit the fan. We received a notice from the bank saying they were starting foreclosure on our home and another saying they were repossessing our truck. Things got serious real quick!!!
My hubby was making a great income. I was a stay at home mom with 3 kids in school. We were dealing with past due bills, medical bills, collection agencies (for other medical bills) and keeping up with all the day-to-day bills.
We didn't have lots of credit cards or loans. We just fell behind on our regular bills. We didn't have a plan or any organization.
I have to give complete credit to my hubby on this one. He searched all over the web and finally came up with a plan that got us out of the financial mess and on stable ground.
First, we wrote up a list of everything we owed. I mean everything.
* Who we owed (ex. mortgage, hospital, electric co.)
* How much we needed to pay to get caught up
* Total amount needed to be completely paid off
* Due date
After seeing everything listed in one place we printed out a blank monthly calendar for the remainder of the year. We wrote in all the bills that weren't due yet on the dates they were due. Some people prefer to write them in on a day or two ahead of their due date, so they are paid early.
With the list of our debts, we were now ready to look at the money coming in. We got out hubby's paycheck and sat down together. To figure this out.
We had a blank notebook laying around and opened to a blank page. On the top of the page we wrote the week's date. Hubby gets paid every week so that is how often we create a budget. We create a new budget each and every week.
On the first line we wrote the amount of his check (actual amount deposited).
Under that we write any money left in the bank account after it has been balanced. Total it up after each line.
Next we take out the money we need for gasoline. My hubby can't make any money for the next week if he can't get to work. So this is important.
Another thing we do right off the bat is deduct for food. Usually $100 - $150 a week, but sometimes it got as low as $50 a week for our family of 5 plus 2 dogs and 2 cats. Those weeks were really, really rough. Find out how we stick to our food budget here.
After those two things we always take out for our home mortgage. We arranged with our mortgage company to have 1/4 of our payment deducted from our account every week. For us it was easier than trying to come up with a big lump sum every month.
Now with the remaining balance (after mortgage, food and gas), we look at the calendar and see what else we can pay. If there is any money left over after that week's bills are paid - it get's put into savings or taken out of the bank and put in an envelope for a special fund.
One thing we do that most people do not is we use cash. I always get out cash to go grocery shopping and for gasoline for the vehicle. That way I definitely have to stay within my budget.
When we have special items we need to save up for, we withdraw the money from our bank and put it in an envelope. We've learned the hard way if it stays in the bank - it get's spent, so we take it out and sock it away. Some things we save up for include: Christmas, back to school supplies, heating oil, birthdays, clothing, auto repairs.
Once we were able to get caught up on all our bills; we've started to pay down our debts. We are constantly between paying down/off our debt and saving for special items.
This process has worked pretty well for us for the past 2 1/2 years. We've paid off lots of medical bills, almost paid off hubby's truck, and paid cash for vehicle repairs, plus lots more.
The main reason it works so well for us is we communicate with each other every week about our financial goals. We prioritize our expenses (what we need and want). We always talk over major purchases and we try to keep a healthy balance between things we need and stuff we want.
I'm not saying this will work for everyone, but if you are in a similar situation our plan is something you could consider.