My column for the May 30, 2007 edition of the Greenhorn Valley View:
Do you have too much month left at the end of your money? Do you never have enough money to do the things you want? Do financial emergencies leave your head spinning?
What if there was a way to make sure you have enough money for all your real needs, AND make sure you have enough money for the things you want to do? What if there was a tool that made all this simple and fun?
There is such a tool, and it can accomplish all these things.
A spending plan is a description of how much money you’re going to spend each month. You can spend money in any of several different categories: rent, food, clothing, and gasoline, for example. You determine what your categories are, and how much you want to spend in each one.
Make up an “account sheet” for each of your categories. An account sheet looks just like your checkbook register, but you just draw the columns on a piece of lined notebook paper. (Click here for an example of an account sheet.) Now every time you get paid, add your predetermined amounts to each category’s account sheet. As you spend money, subtract the amount you spent from the appropriate account sheet. The total of all the account sheets should be the same as the total in your checkbook.
A quick look at any category’s account sheet tells you how much money is available to spend in that category. If the amount in a category is getting low, you can’t spend much until you get paid again. If the amount in a category is pretty high, you may need to lower the amount you put in that category, and increase the amount going to another category.
This same system can be used for saving and emergency spending, as well. Just create a category for “Saving,” or “Emergency Auto Repair,” for example, and put a little money in those categories at every payday, just like you do with the other categories. But this time, you’re not going to take money out very often; only for emergencies or to put your saved money in a better investment.
This method is simple, can be done without a computer, and will ensure you always have at least a little bit of money for those fun activities and for emergencies.