![]() Take some time to decide how much you plan to spend in each area. Now that you have your list, assign a separate envelope or pocket of a wallet to each specific expense category. The rest of my money either goes to savings or stays in my checking account to pay the bills. Yours might be a little bit different and that’s okay. These are the expenses in my budget that vary from week to week. For example, my flexible spending categories are: Personal care (toiletries, cleaning supplies and stuff you buy at Target), Groceries, Coffee shops (yes, coffee gets its own envelope in my world), Dining out/entertainment. Simple as that!įirst, write down all of the flexible spending categories that might apply to you. And when the money runs out, you stop spending in that category. ![]() The cash system requires you to plan how much money you are able to spend before you actually spend it. So let me ask you: Do you really have a strategy in place right now for budgeting?ĭo you know what your limits are when you shop at Target or Wal-Mart or the grocery store? Do you know how much you get to spend when you go out on the town with friends? If not, then I want to challenge you to put your debit card away and commit to setting up a cash system for flexible expenses. Obviously, I am all for keeping track of your spending! But just because you know your account balance at any given time, doesn’t mean you will avoid overspending at restaurants, gas stations, or coffee shops. ![]() Then, there are the classic avoiders who simply use their check card to make purchases all month long and only look over their bank statements when they get that gut feeling they might be getting low on funds. Exhausted because they’ve been obsessing over their finances every single day for the last month, and discouraged because it didn’t make a darn bit of difference when they still paid the electric bill late. They come to my office exhausted and discouraged. So how in the world do we do this? Do we go online and check our account activity every other day to make sure we haven’t overspent? Or, make sure we write down every purchase in our checkbooks so we know our account balance at all times? I know some people who do this and still end up overspending. Most important, budgeting requires you to set boundaries when spending, and stop when the money runs out. Reviewing your account activity gives you a general idea as to where your money has gone - how much you spent at gas stations or restaurants… but we are talking past tense.Ī real budget is an action plan that you set up BEFORE you start making purchases, while bank statements only show what you may have already done to mess up your finances. Some of the confusion might have to do with the fact that many banks offer online tools that arrange all of your account activity into pretty little spending categories. Are you following an actual budget plan or reacting to a balance sheet? Many people assume these are the same thing.
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