No – I am not talking about the type of bag you are being asked to put your groceries in. Nowadays, it seems that everywhere you go; you can use a debit or credit card. It can be convenient to just whip out that plastic and swipe it and be on your way. However, doing so can actually make you spend more! I know it sounds crazy, but it is true! Ready spend less? Then let’s get started!
If you will recall, last week we discussed how you can set up your budget. So, before we go any further, go grab your copy or open your spreadsheet on the computer. Got it? Good.
Take a look through your sheet and place a * next to anything that you use your debit or credit card on. When you get done, I bet that these are most of the items you noted:
Dining Out / Restaurants
Dry Cleaning / Laundry
Now, you may have a few more categories (or a few less) that you listed. As I mentioned above, when you use your debit or credit card for these types of expenses, it can be difficult to keep a close eye on your spending, resulting in you exceeding your budget.
What works best is to use cash for these items. When you have cash, you are less likely to spend, plus you gain a better view of what you are spending and how. And, when you are out of money, you are done spending until the next payday.
The best and simplest way to control what you have to spend each pay period is called “The Envelope System”. It really is as simple as it sounds. You will get envelopes indicate each category on the front.
Next, determine what you have budgeted for that category for your pay period, get that amount from the bank and keep it in your envelope. When you make a purchase, keep a running total on the outside so you always know how much money you have left to spend.
Now, I don’t know about you, but I do best with examples. So, I’ll give you all one based upon five categories, assuming a bi-weekly budget.
$400.00 Groceries (including toiletries and cosmetics)
$100.00 Dining Out / Restaurants
$ 50.00 Clothing
$125.00 Auto Fuel
$ 60.00 Blow
So, now you need $735.00 in cash for your 5 envelopes. The best way to do this is to determine your denominations you will need for each item.
$400 = 20 $20.00 bills
$ 100 = 5 $20.00 bills
$ 50 = 2 $20.00 bills and 1 $10.00 bill
$ 125 = 6 $20.00 bills and 1 $5.00 bill
$ 60 = 3 $20.00 bills
When I go to the bank, I will let them know I need 36 $20.00 bills, 1 $10.00 bill and 1 $5.00. Then, I place the appropriate amount of cash into the appropriate envelopes and am ready to go!
It may seem odd to do this at first, but I can’t believe how much less I spend on EVERYTHING I purchase. I am more cognoscente of my money. I make sure that it is something we really need rather than a want or desire. My family has learned to live on less. You will probably surprise yourself at how much less you spend!
Once you have your budget and spending issues all ironed out, then you can learn how to get out of debt and be a money slave to NO ONE! So, come back next week and learn about how to shout from the rooftops “WE’RE DEBT FREE!!!!”