Keeping on track with budgets

Three questions about budgeting:


  1. How do you prepare yourself mentally for the arduous task of budgeting,
  2. How do you keep yourself on track  and
  3. How do you stop yourself from unnecessary purchases?


I’ve talked about the first one, here’s the second,


How do you keep yourself on track?


Decide what is sacred – treat the rest as earned money

Start by isolating the money you have a purpose for, your “sacred” money, then you are in control.  It’s very easy to spend what you’ve got left after you’ve paid the vital bills or saved the money you want to save for your dreams.  If you say – “I’ll save from what I’ve got left”, you won’t have anything left and it makes saving impossible.


Setting “sacred money” uses our human habits to our advantage.


The remaining problem is our capacity to treat some money (credit cards, tax rebates, “found money” etc) as being easier to spend than money we earn.


So treat everything that isn’t sacred as “earned”.  Try sticking a “post-it” note to your credit card and ask yourself “would I buy it and how much would I pay, if I had to pay cash?”


Try waiting a week to see if you really want something.  In the meantime put the money into a special purpose account (as below).  This makes you treat all your money that isn’t sacred as something that must be spent carefully, so none is wasted.


Try thinking of money as usable or as “special purpose”

Most money apart from sacred money will be usable, it’s there for day-to-day expenses etc.


You might also want a “special purpose” fund.

That money is set aside for the big things, reducing the debts or covering the credit card (!) or utilities, paying for the holidays etc. that are important, but not enough that the “sacred” money goes into them


You put in enough money to cover those amounts (so you need to budget and know what you pay each month for the car, the mortgage, shopping etc.).  Then the big bills and regular expenses, the holiday fund etc. are taken care of.


If you do this, you’ll be surprised how quickly you become reluctant to dip into them for trivial things, and how much your natural instincts help you.


Also, if you insist that the special fund is only used to pay bills that it is designated to cover, you will not tend to spend money when you get a good month without bills (when the Council Tax isn’t levied in some months, for example) and then be drastically short when you get a bigger heating bill than usual a couple of months later.


The money will accumulate in the special fund for regular bills, the sacred money will go away for your long term dreams and the usable money will be all you spend.

And at that point it becomes a habit, it is your “status quo” and it will become hard for you to change and waste your money.



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