Budgeting Tip – Use Real Money
Posted on August 10th, 2010 in Budgeting | No Comments »
photo credit: fauxto_digit
Have you ever had that situation where you get to the end of the month and wonder where all your money went? You’re sure you had a few hundred dollars left in your checking account but now it seems to be empty.
Or how about creating a budget to carefully manage your money and limit your spending only to find out that once again you run out of money just before the end of the month?
The fact is that money in a bank account can be difficult to track. Money flows in and out and we only check our balance from time to time meaning that days or even weeks can go passed where we don’t realize how much money we have available to us. And this can lead to some unfortunate situations.
Using plastic – whether that is a debit card or a credit card – cane make it harder to manage your money and increases the chances of blowing your budget no matter how carefully you try. If we’re honest here we go into the supermarket, for example, grab what we need, hand over the plastic and leave. Many of us, myself included, have little or no idea how much we actually spent. The card went through so we left. Problem solved.
Except that when you’re not seeing exactly how much you’re spending, when you’re not keeping track there can be massive differences between how much you think is in your bank account and how much really is there. And this can cause problems with managing your money and particularly with regard to making debt payments.
This is why, when it comes to spending money, I now prefer to use actual money rather than pay on a card. If you have a budget of $200 to live on a week if you are to meet all your debt repayments, then withdraw this $200 from the ATM and put it in your wallet.
It’s not only a lot easier to see at a glance how much of this money you have left but it also affects your behaviour to a degree. This means that little treats that you may give yourself (an expensive coffee, a magazine etc.) are less likely to happen when you actually have to hand across cold, hard cash rather than a plastic card.
And it can also be fun to try and “beat the budget” to see how much you can keep hold of by the end of the week. And *then* if you’ve managed to economize you can spend the remainder on a treat if you want.
So if you want to manage your money better and pay off your debts easier why not try the “cash not card” challenge? I think you’ll be surprised by how much of a difference this simple technique can make to managing your personal finances.
