Money Management Starts At Home
Money management is essential for living a stress-free life and being able to enjoy our income responsibly. I also know that if I want to manage money in a company, I have to start by being a good administrator of my personal earnings. In our home, my husband and I have a system for organizing budgets and making sure that we do not overspend or miss the payment of something important.
1. Write down everything we spend: We have a little notebook where we write down all the things we buy, even if it cost us as little as .05 cents. We include the date in which we purchased it, the name of the product or service we paid for and the price.
2. Create categories for items: We divide our expenses into categories: food, rent, public services, charity, taxes, transportation, recreation, etc. then assign each item we purchased one of those categories. For example, if we go to a movie, we assign it “recreation”.
3. Add our expenses to spreadsheets: We use Google Sheets for organizing the categories of our expenditure. There we transfer the items that we write in the little notebook, and we total all the expenses for each group.
4. Prioritize: We make sure that one category doesn’t take up all of our spendings, so we assign how much money each category should get and the order which gets paid first. Think of it as a bucket that fills until it overflows into the next and once the second fill up, it overflows into the next and so on. Here is the order of our buckets: Giving > Savings > Tax > Rent > Business Expenses > Groceries > Cell > Misc needs > Fun > savings #2. This process means if there is a month where we can’t fill all the buckets, then the last buckets won’t get filled (in this case savings #2 or Fun).
5. Budget by putting cash in envelops for each category: We separate the money that we prioritized for each category in separate envelopes. It allows us to keep a record of the amounts we have for the whole month. For example: if we spend all the money on the “eating out envelop” in just two meals, we know that during that month we should not eat out again. Instead, we eat more at home. We can eat out more times as long as there is still money in that specific envelope. This system also allows us to know where we are taking from. Let’s say an emergency happens that we didn’t budget for, now we can take the money out of the “Fun” envelope and know we can still pay rent, buy groceries etc.
6. Pre-pay our credit card before instead of using a card for debt: If your credit card allows, we have found it helpful to pay our credit card BEFORE we make a purchase or the same day immediately after the purchase. This guarantees we have the money already allocated for the purchase and keeps us out of debt.
7. Plan your purchases, including unplanned ones: We separate some money for unexpected expenses and include it in our budget. It is better to be prepared than overspending and later being worried about how to pay the costs of a new service or product that was necessary to acquire.
I hope that these tips help you to organize your finances. If you use a different system, let me know! I would be happy to learn new ways in which I can keep improving my money management skills.