Tired of increasing credit card debt, or overdraw your checking account? Would you like to be the one to fix your family’s finances? Here is a simple system that can help you do it!
Eliminate the Invisi-bill
It’s easy to overspend if you don’t have any idea that you are doing it! Do you know how much money you can spend today without getting into trouble this month? I’m going to share the system I used in college to really know exactly how much I could spend:
- I always carried my checkbook.
- I immediately recorded any expenses.
- Not just checks or ATM transactions but also credit card charges.
- If I ever wanted to spend I could check the balance to see if I could afford it!
Yes, I realize some of these expenses won’t clear immediately, but if you assume that they do then you never risk overdraft fees! Also, when that credit card bill comes in the mail you will have the money available to pay it off.
But My Finances are too Complex!
I bet you are thinking that this could work for a college kid but your finances are too complex you have lots monthly bills, and some of them you don’t know the amount ahead of time. Well there is good news; it isn’t hard to extend my simple system to work by:
- Recording any fixed monthly expenses at the start of the month
- Building up a reserve for variable monthly expenses
If you always enter the fixed monthly expenses at the start of the month they will never be a nasty surprise at the end of the month. As for variable expenses- you probably already have a good guess of the range a bill could be. For example your electric bill may be 2-3 times more in the summer when running the AC, but you know it isn’t 20-30 times more. If you put aside some amount of cash reserve you can cover the variable part of your variable expenses. Also, once you know how much you really have to spend you will want to have some reserve cash anyway… Otherwise you can’t take advantage of life’s opportunities because you are broke!
But I Hate All that Math
Do you like trying to manage credit card interest payments and overdraft fees better then tracking your expenses? I certainly don’t! However, there is some good new because once you increase your reserves enough and have the habit of not overspending then you don’t have to watch your balance as closely. I haven’t kept an exact total for years and haven’t overspent in years either! These days I just keep a large enough reserve that I know I’m not going to over draw it in a month. Then if I see my reserves dropping I spend less the next month(s), until my reserves increase enough so that I feel free to spend a bit more.