Monday, 27 December 2010

Money Makeover: Tip #2 - Managing Budgeted Items

When working to a budget, it helps to keep on top of it, rather than do it all at the end of the month (I started off doing this, and it quickly become very boring and tedious – not to mention a PITA for reconciliation).

So, it can pay to have something on you to help keep track of your expenses as you go. It could be anything, a notebook or for me - a phone app.

However, this in itself can become cumbersome – and after taking some time out to think about it, I realised the problem:

When we are working to a budget, there are no “surprises” with the expenses.

Which is kind of amusing, since this is precisely why we budget in the first place, right? So, the vast majority of expenses/outgoings we enter into our “thing” (app, notebook, whatever) are expected. While not as tedious and boring as doing it all in one hit, it’s still pretty fruitless doing so - I still find it “wasteful”.

Having come to this conclusion, I have just deleted all of my accounts off my phone.

Turn It On It’s Head

Now, I have added the sections in the “Cuttable Payments” (see the post on budgeting if you are unsure what this means) as accounts. Then at the start of each month, I simply “top up” the account with the amount required to bring it to the budgeted amount for that month.

I find this much more usable because:

  • When we have a good budget in place, the only things that really ever change are the “cuttable” expenses.
  • I can see VERY quickly how much money I have left to spend in each expense category.
  • It’s obvious if I am overspending on a expense category (since it will go in the red straight away).
  • It is easier to refine categories of payments within each “account”. By removing a “layer” (“Account > Category > Item” is now “Category > Item”) I get a clearer view of what is going on within the “cuttable” category.
  • It’s super quick to manage my accounts, because I no longer enter 80% of the transactions on my actual accounts.

So, I certainly haven’t ditched Checkbook, I still love it – I am just actually finding it much more useful now! I still use the “budgeting” feature, except now I use it to finely track expenses.

Always remember, cutting waste is not just about cutting wasteful expenses, it’s about cutting wasteful practices. Money management is easier to stick to if you make the “management” easy!

Happy saving!

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