Using the old-fashioned money envelope system of allocating spending money is a tried and true approach. It works.
However, the cold, hard, reality, for me, is that I am not going to bring home cash, divvy it up into envelopes and deal in cash everywhere I go. It will not happen!
But the good news is, I still use the system. On paper. And it works!
Here’s how:
Our weekly spending is divided into three categories:
- Groceries
- Gas
- Other spending
Using an excel spreadsheet (or a piece of notebook paper with lines drawn), this is how the top of my spreadsheet looks like:
| Date:
08/19 to 08/25 |
Groceries | Gas | Other Spending |
| 160.00 | 50.00 | 135.00 |
Here is where I part ways with the traditional system. In the spirit of honesty, I have to confess that I do most of my spending on a credit card. (I like the points!) This system keeps me from overspending, which is oh so easy to do on a credit card.
Every couple of days, I take the time to jot down my spending for the week. Usually, I log on to my account (I am very visual) but, because I have text alerts, I could also use my phone.
This is how my spreadsheet currently looks (today being 08/23):
| Date:
08/19 to 08/25 |
Groceries | Gas | Spending |
| (budgeted) | 160.00 | 50.00 | 135.00 |
| spent | 14.12 | 6.30 | |
| 32.50 | 2.99 | ||
| 5.00 | |||
I quickly add up the total spent for each category, subtract from my budgeted amount and know what I have left to spend. On pay day, every pay day, I pay the bill. There is absolutely no need to wait on a statement. That is what will get you in trouble.
Just like the traditional system, if the money is gone in one category, there are a couple of options:
- Quit spending in that category
- Borrow from another category
If all the money, for all the categories, has been spent, IT IS TIME TO QUIT SPENDING!
This system, one week at a time, is very doable. It is actually quite surprising to see how much spending is really happening.
This system has really helped me to get spending under control. Hopefully it helps you too!
One other thing. Often I reduce the spending category and keep part of it in cash. That’s because I hate tracking small amounts and they add up really quickly. While I am not willing to pay everything with cash, keeping a small amount of cash to pay for little things, works.
Any thoughts? What system works for you?
Have a great day and happy (planned) spending!