This article was written by Spencer, a GRS reader in New York.

As a guy who just finished paying off $14,000 in credit card debt, I wanted to share one tip that helped me get over the bad debt hump. I allocate my spending money on a per diem system. At the beginning of each cycle of my monthly budget, I set aside funds for:

• Every fixed expense that I have (rent, cable/internet, groceries, power)
• Any unique expenses (a plane ticket, for example)
• And, of course, my savings (about 8 percent of my after-tax, after-401k income)

After allocating this money, I go to the bank, withdraw the remaining funds in cash, and divide it among envelopes for each day of the month. Each day, I open an envelope and add the day's cash to my wallet. For me, the physical parceling of the cash is an important psychological step.

Last week, I announced that Kris and I have refinanced our mortgage at 4.96% for 30 years. In the comments, Ian expressed disappointment that we'd opted for the longer term when we could have afforded to take out a 15 year mortgage at 4.625%. "Starting your 30 years over is no way to get rich slowly," he wrote.

He has a point.

Kris and I took out the 30-year mortgage because we wanted a safety net. We will continue to pay $2,000 each month toward our mortgage, so we could have afforded the shorter term, but we opted to take a longer mortgage so that we had a cushion if something happened.

Kris and I don't have kids. We have cats. We have four of them.

Our "children": Nemo, Simon, Maxwell, and Toto.

We'd have more, but Kris won't allow it. She says I'm in danger of becoming the Crazy Cat Gentleman. On the whole, I cannot imagine my life without these animals. They bring us joy and fulfillment, and the cost is minimal.

Under normal circumstances, our four cats cost us a total of about $750 a year, which is roughly fifty cents per animal per day. That's a bargain! The problem, of course, comes from abnormal circumstances. Once every three years or so, one of the cats costs us a small fortune.

In 2004, Kris and I bought a hundred-year-old farmhouse. We'd been living in a 1976 ranch-style home that was virtually maintenance-free. We knew that our new house was quirky, and that it needed some remodeling, but we didn't quite understand the extent to which maintenance would dominate our lives. Every summer, we've had a major project. Or two. This year is no different.

In previous years we've remodeled the bathroom, replaced the electrical system, hung new drywall, and more. This year our focus is on the home's exterior. While we've been improving the inside, the outside has begun to fall into disrepair. It's not an eyesore yet, but it could become one. This winter's heavy snow pulled the gutters away from the house. Certain sections (most of which are purely decorative, like balconies) are beginning to rot. And the paint has begun to flake and peel:

There's a lot of work to be done. As always, the prospect of the time and money involved to patch things up makes me glum. It seems as if there's always something new that needs attention.

Do you hate the very thought of budgeting? Does tracking every dollar you spend seem like a waste of time — or, worse, an activity guaranteed to curtail your spending "freedom"? Good news, then...you and I are a lot alike! But one month, after spending over nine hundred dollars on clothes — and not realizing it until I got the credit card bill! — I recognized I needed to rethink my assumptions about budgeting.

Overcoming obstacles to setting up your budget
Even after reading a lot of articles and several books on how to create a budget (including some here on Get Rich Slowly), none of them ever really stuck with me. I'd flip through them, thinking that they sounded great, but kept putting them off. Each month I put them off, though, was a month I veered dangerously closer to being financially "upside down".

I realized that I had two beliefs I needed to get past before setting up a budget:

J.D. is on vacation. This article was written by Wanda, who wrote to tell me that a shocking number of people have trouble paying their utility bills correctly.

How do you pay your bills? My father taught me to pay them on time and in full. That's great advice, but there is so much more to correctly paying your bills. As a small town municipal employee, I have assisted people with their water bills for many years. Most of the problems that people have could have been prevented or solved simply by following the following steps.

Read Your Bills

When you receive your bill, read it from top to bottom. The bills that I send out have a lot of information on them. They have last month's amount due and the amount the town received for that bill. Those two numbers should match each other and the amount you paid.

In the past, many Get Rich Slowly readers have sung the praises of the "adult allowance". Though I've read enthusiastic comments supporting this idea, I've never paid it much heed. To be honest, it's always sounded lame, and I didn't think it would be useful to me. I was wrong.

Accidental Allowance

Before our short vacation in early October, I pulled $200 out of the ATM. This is unusual for me. I don't like to carry a lot of cash. I find it easier to track my spending when I use credit or debit cards.

I didn't spend very much on our trip. I bought a few old books, but mostly we did low- or no-cost sightseeing. When we returned home, I still had about $160 in my wallet.

Housing is the largest expense in the budget of most families. But how much is too much to spend on shelter? An article in Saturday's New York Times contains a shocking example of one woman who crossed the line:

What she got was a mortgage she could not afford. Toward the $385,000 cost, [Christina] Natale made a down payment of $185,000, a little less than what she took away from the sale of her grandfather's home. The loan that made up the difference, with closing costs, broker's fee, taxes and insurance, meant a monthly bill of $1,873.96, about $100 less than her monthly take-home pay as an administrative assistant.

I am not unsympathetic to tales of financial hardship, but this stretches even my compassion. Ms. Natale (who has three children) took out a housing loan that left her just $100 a month for every other expense in her life. She shouldn't need an outside voice to tell her that this was an impossible situation. (All the same, where were the outside voices?)

Building a budget is one of the basic tasks of personal finance. But not everyone can keep a budget. As much as I'd like to, I don't feel comfortable with detailed planning. I continue to use a spending plan as a rough guide to my future, but a traditional budget just doesn't work for me.

Last night I stumbled across the Balanced Money Formula proposed by Elizabeth Warren and Amelia Tyagi in their excellent book, All Your Worth: The Ultimate Lifetime Money Plan [my review]. Like my spending plan, the Balanced Money Formula is an alternative to traditional budgets. Though I considered this concept a little "light" in the past, it really hit home yesterday. It helped me to realize that my own spending has become unbalanced.

The Balanced Money Formula

The Balanced Money Formula is based on your net income (your income after taxes). Warren and Tyagi say that, ideally, no more than 50% of your paycheck should be spent on Needs (and keeping them below 35% is best). Of the remaining amount, at least 20% should be devoted to Saving, while up to 30% can be spent on Wants.

In our recent discussion about tithing, I made a confession:

I do not tithe to church or charity. I feel guilty about this. My rationale is always: “Once I take care of myself, I'll take care of other people.” Yet what do I mean by “taking care of myself”? I don't know. Sometimes I think “once I've saved X, then I'll start sharing my wealth”, but X seems to be a moving target.

I've thought a lot about this over the past couple weeks. I've looked at my own life: I have a $10,000 emergency fund, a growing business, and no consumer debt. I own an 1800-square-foot home on half an acre, a car, and a pantry stocked with food. Despite all this, I still sometimes feel poor. I'm not. I know this. According to the Global Rich List, my wealth places me in the top 1% of the world population, and that will likely increase as I get older.

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