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Budgeting 101

I came home from work and told my husband, "We are going to live on a budget and buy our next car with cash." He thought I was crazy.

A few years ago a popular t-shirt boldly proclaimed, “Born to Boogie”. If I could design such a mantra for myself it would have to read, “Born to Budget”. I have a profound sense of anticipation each month as I add up all the figures in my account book. I have been known to frequently raise my fist in jubilation and exclaim, “WE MADE IT!” I tell you, in truth, “Living on a budget is one of the best decisions that my husband and I have ever made!”

A debt free lifestyle has allowed us countless blessings. The transition from two incomes to one income (when I was finally able to conceive a child) was nearly painless. We were able to give another homeschooling family a car when we purchased a newer one. They had been diligently seeking God for reliable transportation. We have been able to repeatedly support missionaries in their effort to spread the gospel. Best of all, we have been able to be obedient when God has prompted our hearts to give a special gift.

But, alas, our story did not begin this way. When we married in June of 1988, Larry's parents gifted us with $1000 dollars. I had never had that much money in all my 23 years of life. We felt like we were “set”. But, by August, I realized the sad truth that our “nest egg” was nearly gone! How could this happen? We were both working. We were paying our bills. We were not, by any means, extravagantly spending money. We had not planned to fail … but had failed to plan. We had no written budget. No way to gauge what we were spending.

I worked for Christian radio and Larry Burkett had just begun his daily half hour program “Money Matters”. With rapt attention I listened as Larry outlined the ideas of budgeting, planning for future expenses, and paying with CASH! Although we had no savings, my husband and I were in no credit card debt either. THIS was the time to implement some changes! I came home from work and told my husband, “We are going to live on a budget and buy our next car with cash.” He thought I was crazy! We were both working in broadcasting for six dollars per hour!

You may be reading this and feel that your situation is hopeless. Or you cannot bear to see all the hard numbers on paper. Or you don't need a budget. Trust in God must come first. As you truly desire to live within your means, God will honor that! He will pour out His grace upon you and give you divine insight. Our “budget story” has involved many blessings. Our Heavenly Father has answered the desires of our hearts and met our needs countless times.

Living on a budget is hard work. You must be willing to honestly face your wants and ask God if they are truly needs. There will be questions from family members who feel you really should spend more money on their Christmas and birthday gifts. There will be days that you feel you cannot go on without a trip to the local fast food restaurant. But, your quota of “fun money” is spent for the month. You must take up “delayed gratification” time and time again and make it your friend. However, having said that, let me repeat, “Living on a budget is one of the BEST decisions we have ever made!” It has been, so to speak, worth every penny. Let's Get Started!!
(Step 1) – The first thing we had to do was create a “paper trail” for our money. For two months, each night we wrote down every penny we had spent that day in a notebook. The “daily habit” is very important at this stage. You will be amazed at how many purchases will not have paper receipts. The fifty-cent Coke from the machine at work. The $5.00 donation to somebody for their child's school band. The money spent at a garage sale. Try to account for it all.

(Step 2) – After two months, you should very easily be able to look at your “purchase record” and divide it into categories. Many will present themselves easily. Such as: food, utilities, gas, and entertainment.

(Step 3) – Figure your monthly income. If you work on commission, use your total salary for the last 12 months and divide by 12. This becomes your “base income”. If you make more than this one month, you will need to bank the excess for the “lean months”. We have always had “base income” and “additional income” figured separately. For instance: We live and budget off of my husband's salary. But, occasionally, I do free lance narrations. If we receive a check from one of these jobs, I note the amount at the bottom of my “monthly total sheet”. This way, I remember that we have received this extra income. But, I do not budget this money. We use it for special projects or home improvements.

(Step 4) - Take a plain sheet of paper. Make three columns across the top. At the far left side write “category” at the top. In the middle your heading should say, “spent”. Label the column at the far right as “budget”. You are going to use this sheet to organize your budget categories. You will compare what you are spending each month with what you need to spend to make your budget work. Fill in the sheet beginning with “tithe” as your first category. I then list all of the expenses that are “unchangeable”. For instance: your life and car insurance stay the same each month. If you did not pay your car, life, or house insurance in the two months that you monitored, look up the quarterly, bi-yearly, or yearly amounts of these bills in your checkbook. Divide the totals by 4 (quarterly), 6 (bi-annually) or 12 (annually). Do the same for school loans or any other regularly occurring bills. Remember, your house taxes occur regularly. Add a category for taxes, if they are not combined as a part of your mortgage. As you list each budget category, fill in “what you spend” in the “spent” column. NOT what you would like to spend … but what you are really spending in each area.

(Step 5) - Okay, now add in those nasty credit card payments (if you have any). Write down the minimum payment in the “spent” column. You are paying the minimum any way. So, you may as well face the music.

(Step 6) – Now look at those “floating” expenses. Let's say that during your two month sample period, you spend $300 the first month on grocery items and $400 the next month. Add them together and divide by 2 to get the average amount of $350 for your food budget. Do the same for entertainment, gas, household, etc. Remember to consider such things as: Clothing. Unless you are reading this without clothes, you DO spend money on clothing. I get all my clothes from rummage sales, hand-me-downs, or really, really good clearance sales. But, I still have to put an amount down in the budget for clothing. Consider car repairs and license, home maintenance, gifts and Christmas. If you have a pet, Fido gets his own category. If you want to go on a vacation, divide what you'd like to spend by 12 and add that amount to your list. Oh, and don't forget homeschooling!!! A MOST important category!! Medical is an often overlooked category. Figure your average number of office visits from the past year. Add in prescription costs, dentist visits, eyeglasses, and the cost of over the counter medications. Your checkbook should be an invaluable tool for filling in the gaps in your memory for medical costs.

A note on miscellaneous: Yes, I have a misc. category in our budget. I allow $15 each month that simply does not fit into any other category. This is to be expected. But, if you find yourself with a lot of “misc.” expenses you may want to reevaluate if these expenses can be put into some other categories.

(Step 7) Whew! The hard part is behind you. You should now have a paper with about 17 to 20 categories and a reasonable idea of what you spend each month in each area written down under the “spent” heading. NOW, add up all of your expenses and compare this figure to your total income each month. Are you comfortable with how these look? Some immediate thoughts will strike you. This is where you “tweak” the budget. When Larry and I went through this process in 1988, it became immediately clear that we were spending FAR too much money on eating out. With our income $50 a month to eat out was WAY too much. This category was immediately reduced to $15 and we ate out once a month. We still do, in fact! Look at each category – especially the “floating” expenses. How can you reduce the amount in these categories to better reflect your plan for saving money and getting out of debt? Remember, whatever you do, the amount you earn and the amount you spend, cannot total more than 100 percent. Hint: Try to save 10 percent. (I have a separate category for savings to remind myself each month to try to put an amount away for future expenses.) Saving for the future IS an integral part of any budget. Ultimately you will want to save six months of income for an “emergency fund”.

(Step 8) Since we have never been in consumer debt, I am NO credit card expert. I defer to those who are well versed in this area. Mary Hunt has written a WONDERFUL book on becoming debt free entitled, “The Complete Cheapskate”. She knows her stuff! They were many THOUSANDS of dollars in debt! She has a very helpful chart that will “walk you through” paying off and staying free from credit card debt in about two years. She also has lots of nifty tips for living frugally.

Larry Burkett has very user-friendly budget materials and books. His website ( has a chart that you can fill in to help determine what categories in your budget are out of whack and where you need to reduce expenses. They also have some other handy on-line tools and wonderful resources for sale.

Here are my general observations concerning credit card debt and your budget. Put any extra money toward the principle of these debts. Take the credit card with either the lowest amount owed or the highest interest rate and concentrate on paying these off first. Then, put the entire amount that you were paying on this, now retired, debt toward the next highest amount. In this way, you are always paying more than the minimum amount and paying this debt off at a much faster rate than you (or the credit card companies) expect! Yes, we keep a credit card. But, we NEVER charge anything that is not in the budget. We pay the balance IN FULL each month.

(Step 9) Go over the plan with your spouse (hopefully you are going through this budgeting process together) and your children. Explain to them that changes must be made. Keep this budget out where you can see it! Stick to your plan!! Take a calculator to the grocery store if you are not accustomed to limiting your weekly expenditures.
Keeping Track of It All
(Step 1) Get a simple household ledger. These little black books are available at any office supply store. Whenever I make a purchase, I record: the date, the store, and the amount spent in this book. At the end of the month, I simply go through the book, write down each expense on a blank piece of paper under one of my budget categories. Add up the totals and I can instantly see if I “made budget”. If we did, I do a victory dance. If we did not, I look “grim” when my dear husband returns from work. If I didn't “make budget”, I will know exactly how much I must adjust our monthly spending to get back on track with the plan.

Bonus Hint #1 – Here's an extra step that you don't have to take. But, I have found it to be quite helpful. I have a short three or four letter code for each of my budget categories. I record this “code” at the front of each entry. This makes it super easy for me to go through my ledger book at the end of each month and total up the expenditures from each category. I keep a list of my codes at the back of my ledger book for reference. For instance:
Hse. is household
Dr. is medical
Food is food!
Ins. is Insurance
(Step 2) – After you total all your expenses from each budget category, record this information on your “monthly total sheet”. Your “monthly total sheet” is a single piece of paper. It would be SO easy to make a blank template in Excel or Word. Leave a space at the top to fill in the date. For instance: April 2002. There are three columns. The first is labeled “categories” (list all your budget categories under this heading – just as you did when you planned your budget). The middle column is “spent” and the last is “banked”. The banked column is a reminder that although, for instance, your car insurance was not due in April, you banked your monthly quota for this category. This way when the insurance IS due in six months, all the money to pay this bill is waiting in the bank! I have used the “banked” column to keep track of: insurance, property taxes, car repair fund, and other categories for which I need to “bank” a certain amount of money each month.

(Step 3) – At the end of each month, total your expenditures and your income. Don't forget to add your “banked” money in with your expenditures. It is as though this money is already spent. (Note - When you PAY your insurance bill in six months – don't add the full amount to your monthly expense sheet! – just the regular amount that you bank each month for this bill. Otherwise it will appear, in essence, as though you paid the bill twice.)

(Step 4) – Compare your expenditures and your income for the month. Are there any areas that you overspent? Make any adjustments that are needed to insure you keep on your spending plan.

Bonus Hint #2 – Here's another step that I take each month. At the far right hand side of my “monthly expense sheet” I have a column called Year to Date. Each month I keep a running total of what I have spent thus far in this category. Then, quarterly I write a report for Larry that gives him the current status of our budget. This report is a simple piece of notebook paper that lists our budget categories. I then list the average that we have spent this year for each category. This way, we KNOW well in advance if we are overspending in any one category. I added this step to our budget about three years ago because I got tired of the “end of the year panic”. One year I overspent a little bit each month in our food budget and had something like $80 for groceries during the month of December. We ate a lot of cheap turkey that month! So, this extra step has saved me a lot of headaches, time, and energy in the long run.
Final Thoughts
Do NOT be discouraged. It takes about six months for everything to “even out”. After this point and time, you will have money set aside for upcoming bills, car emergencies, and other things that life simply presents to you at the most inopportune moment. “And let us not grow weary while doing good, for in due season we shall reap if we do not lose heart.” Galatians 6:9

There are budget books and computer budgeting programs that would, I'm sure, be easy to use and implement. The main thing is to USE THEM. In closing, a budget is not a noose around your neck. But, a spending plan that allows you to be sure that you are wisely using the money with which God has blessed you.

(editor's note: Hope Ware is a member of our HomeschoolingBOYS email encouragement list! If you were encouraged by this article, please feel free to email her at and let her know. However, Hope and Larry are busy homeschooling parents, just like the rest of us. And because they aren't *professional* financial counselors, please refrain from requesting financial advice via email. Letters of this nature will not be acknowleged.)

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