Do you have the nagging feeling that you may be overspending when you buy groceries or go out to eat? After all, its so easy to add extras to your cart or head to your favorite restaurant when the cupboard is empty and along the way bust your budget.
Recently at a party, a friend told me: Ive got the best budget in the world I just dont follow it.
When he and his wife are tired, they succumb to the temptation to eat out even if they are exceeding their monthly limit for restaurant dinners. And to make the potential for overspending even greater, they based their eating out on a number of nights, not a dollar amount.
Temptation and undisciplined spending can make the best budget irrelevant. Overspending can be so easy. But sticking to your budget can be easy, too.
The best way Ive found to interrupt a pattern of overspending and adhere to my budget is the cash envelope system. Envelopes give you a visual reminder of your commitment and a place to hold the actual money available to you. Theres no guessing game, no rationalizing, no pretending.
You can buy a fancy cash envelope system, subscribe to an online system such as Mvelopes or build your own. I recommend that you do it yourself.
Building your own system is not difficult and costs almost nothing. To get started, you will need five to seven envelopes. They can be new or used, and they can be any size that works for you.
Then decide what spending will be paid in cash from your envelopes. Customize your system. What works for you does not need to work for anyone else.
I recommend the these categories:
b Spontaneous spending.
You also might consider coffee, lunch, clothing and any other spontaneously purchased items. Clearly label the envelopes on the front and back because they serve as visual reminders of your commitment to live by your budget.
Hint: You may need to create a set of envelopes for yourself and for your partner, especially for categories such as restaurants, spending and gasoline.
Now its time to decide how much you will spend each month in each category.
I recommend you take money out of each paycheck to fill your envelopes. For example, if you budgeted $300 a month for groceries and you get paid twice a month, take $150 from each paycheck.
When you get your cash, dont forget to get the right quantity of bills so you can divide your money properly. For example, you cant get all $20 bills if you budget $150 for your grocery envelope.
With your envelopes labeled and filled, you are ready to interrupt that pattern of overspending.
Sure, you can still decide to go out to dinner despite having an empty restaurant envelope. But this choice is likely to be more deliberate and conscious rather than an impulsive decision that leaves you with the nagging feeling you arent in control of your money.
Durango resident and personal finance coach Matt Kelly owns Momentum: Personal Finance. www.PersonalFinanceCoaching.com.