Manage Your Money - Step# 6: Monitoring Your Regular Expenses

"I can make more generals, but horses cost money." ~ Abraham Lincoln

Hello! Today, our topic is about monitoring regular expenses.

There are three important expenses that you would like to monitor.

(1) Regular expenses
(2) Credit card expenses
(3) Non-regular expenses

In this post I will show you quickly how to monitor your regular expenses using a spreadsheet. In this example, I use Microsoft Excel since it is readily available in most PC's. You can you use other spreadsheets available in your PC, too.

Table 1 Regular Expense Monitoring

The first column is for the list of regular expenses while the rest of the columns are for the scheduled dates when you put money into the envelopes. I suggest to divide the payment into two if you receive your income on a bimonthly basis. In this example, I choose the 5th and the 20th days of the month. You can also choose the 15th and the 30th days of the month if this coincide with your paydays.

The bottom row is for the total expense per column.

There are at least two benefits of monitoring your regular expenses. These are as follows.

(1) You know where your money went.
(2) You know whether you are overspending or living just within your budget.

OK! Start creating your own spreadsheet.

NOTE: As much as possible update the spreadsheet at the same time you put your money into the envelopes. Don't forget to update the piece of paper inside the envelope; this will come handy later.

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Manage Your Money - Step# 5: Depositing Allocated Funds to Your Personal Bank

"I have learnt to seek my happiness in limiting my desires, rather than attempting to satisfy them." ~ John Stuart Mill

Now let's proceed to the next step - Depositing Allocated Funds to Your Personal Bank.

So it's your payday! You've been scrimping for the past few days prior to your payday, and now you can't wait to get your hands on those cash. But wait! Before you rush to the mall to dispose your money do the following first.

(1) Withdraw cash from your ATM equivalent to your allocated funds
      Do not withdraw your cash one time. Make multiple withdrawals in terms of P400 or P900 or P1400 or P1900 so that it's easy for you to divide it among the envelopes.  

(2) Go straight home and deposit the money to the envelopes
      By going to the mall with your allocated funds inside your pocket or wallet you risk losing it. Click here to know why.

(3) Write the date and amount of your deposit to the piece of paper that can be found inside each envelope
      This will help you track down you deposits and withdrawals.

(4) Put the envelopes back to the cabinet, lock it
      Consider the money inside the envelopes as not longer your own. You no longer have the freedom to spend it; it's gone.

(5) You can now go out to spend the rest of the money in your ATM
      Now, it is safe to go shopping.

Fairly, simple right? Anybody can do it. But don't let the simplicity of this system makes you underestimate it because it's a very powerful tool in managing your money.

REMINDER: Do not spend the money inside the envelopes for something other than what it's intended for. However, in cases of emergency and you really need money then make sure that you log the amount as borrowed money that you really need to pay ASAP. Remember that it is not your money anymore! However, avoid doing this lest you develop a bad habit in managing your money.

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Manage Your Money - Step# 4: Make Your Own Personal Bank

"Respect your efforts, respect yourself. Self-respect leads to self-discipline. When you have both firmly under your belt, that's real power." -- Clint Eastwood

 

At this point, I am assuming that you already adjusted your allocations to match your actual take home pay. If not yet, please go back to step# 3.

Basically, you are making a lifestyle change, although momentarily until you can afford your desired lifestyle. What's next?

The next step is to make your own personal bank to where your allocated funds will be deposited. (Who says only big time businessmen can create banks.) How? This is very simple.

1st: Buy long mailing envelopes, your personal banks
2nd: Label the envelopes - 'RICE' for rice allocation, 'ELECTRICITY' for electricity bill allocation, etc.
3rd: Get a lengthwise piece of papers and put one inside each envelop
4th: Keep the envelopes in a cabinet and locked it.

That's it! Now you are ready to roll. All we have to do now is wait for your next payday.

I learned this simple yet very effective technique of managing my money during our Pre-Cana Seminar with my wife. The couple speakers that afternoon were not really teaching us how to budget, but when the wife mentioned how she used envelopes to store her husband's money, I did not forget it. I have been using it for 10 years now! It's very effective.

The advantage of the envelope over the real bank, and cooperative is that you can withdraw from your personal bank very quickly. The downside is that you should be very disciplined in your withdrawal; you should only withdraw money for the intended expense. Otherwise, your budget will not become effective. So it's very important that the person holding the keys to the cabinet should be more of a Spartan than a Monarch.

We will talk later when we can use banks and cooperatives to manage our fund. Yes, these are part of our money management strategies.

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