If you’re serious about getting your financial life in order, your first step is to make a budget. If you haven’t made one yet, stop everything and get cracking with a free template.
But what happens when you’re always going over your limit?
Most people have a budgeting area that they just can’t stick to, whether it’s a shoe-buying habit or a weakness for takeout. Try some simple steps for identifying the weakness, and then solve it by switching to a cash-only accounting system for that area.
Step One: Weekly Accounting
If you suspect that you’re not meeting your budget goals, break out your calculator and track your spending once per week. Write down everything to see if you can find a pattern that reveals where your money is going. Do you notice lots of takeout on Tuesdays? Did you have an unexpected car repair? By the end of the month — that’s four or five investigative bookkeeping sessions — you should be able to tell where the bleeding is coming from.
Step Two: Put Supports in Place
Once you know exactly what your weakness are, it’s time to work on eliminating the situations that lead you to spend extra money. If you experienced a one-time emergency, try setting aside a bit extra each month to rebuild your savings. Once you’ve paid yourself back, keep funneling that bit of cash into an emergency fund so you’ll be better prepared in the future.
In areas where you’ve found a pattern of overspending, it’s time to make some changes. Do takeout Tuesdays happen because your schedule is packed that day? Try making a meal in your slow cooker that will be hot and ready when you get home that night. Got a thing for window shopping that leads to splurges? Drive home the back way so you don’t go past the mall. When you figure out creative ways to eliminate temptation, you create the conditions for success.
Step Three: Move to a Cash-Only System for Problem Areas
Before smartphones and ATMs, lots of people kept cash from their paychecks in different envelopes so it would be there when the time came to pay the bills or buy groceries. The envelope system can still work for you by keeping you honest about your biggest budget challenges. For example, if eating out is an issue, keep your budgeted amount for the week or month in cash in an appropriately labeled envelope. When you’re out of cash, there’s no more takeout until payday — period. It’s a simple visual system that’s highly effective.
Once you identify your budget weaknesses, having a plan in place will keep you on the right financial track.