Let meteach you How to Manage Money Betterwith this simpleMoney Management System. This is the fifth post in the Creative Savings’ Beginners Guide to Budgeting Series. To read all posts in order, start withWhy You Need a Budget, then continue reading the rest of the serieson this page.
Now that you’vecreated your very own budget,it’s time to focus on putting that budget into practice with a money management system {MMS}. If that sounds technical and complicated, it’s really not!
This is just a detailed overview of your entire finances so you know exactly what you’ve already spent, and what youhave leftto spend. Otherwise, it would be way too easy to go over budget, and we wouldn’t have any practical or solid way to keep ourselves accountable.
So, let’s talk more about exactly what a MMS does, and how to set one up!
Real Time Tracking
Dave Ramsey would say that the best way to track budget amounts is withthe cash envelope system, and if you struggle with the temptation to overspend on your credit card, I would have to agree. However, it just didn’t work for us. My husband actually spends more with cash in his pocket, and I did not feel safe carrying all those bills around!
Instead, I use a money management system that is more of a modern day twist on that concept. Rather than pull your monthly totals from the budget sheet in cash, you assign them a column in an account tracker, which is basically a glorified checking and savings account register.
This tool hostsallyour budget categories and amounts, and the final total always equals the exact numbers in your checking and savings. It also tracks all your expenses in real time, so you know what you have to spend at any given moment!
Sograb your budget sheet, then print out a copy of the account trackers below. This is probably the most comprehensive step of them all, so I encourage you to read very carefully— we’re about to cover a lot of details — but it will be SO worth it!
Download the printable checking file|Download the printable savings file
How to Set Up an Account Tracker
1. “Carry over” all of your budget categoriesfrom the budget sheet into your checking and savings account trackers, and write them across the top row.Whendeciding which categories to use and where, there are two things you need to remember:
- Thechecking account should hold categories that are a lot easier to access than the savings. {i.e. purchases you see yourself making every week or two weeks.}
- You can use broad categories, or their respective sub-categories based on how detailed you want your tracking to be.
I like to use broad categories because it gives me flexibility to spend what I need within theentire column.For example, I could overspend in Eating Out, but underspend in Groceries, and as long as I come in under the Food budget, I’m still OK.
However, be careful when working with categories that contain both fixed and variable expenses. Variables can easily cut into your fixed {i.e. home improvement vs a mortgage payment}, so it’s best to keep those separate as much as possible.
2. Determine when you will “deposit” money into each of these columns.Your budget was originally createdbased on monthly amounts, but now you can break it down even further than that, depending on how often you get paid.
If you get paid every two weeks, divide your monthly budget categoriesby 2. If you get paid every week, divide itby 4.Write these numbers underneath your budget categories for each column. Then, every time you receive income from a paycheck, carry these amounts into each of your columns and add it to the final total.
If you receive income that changes significantly month-to-month, or you don’t get paid for weeks at a time, try to mimic a steady paycheck as much as possible by pulling out the same amount each month to distribute among your columns.
3. Write in a starting balance for each column based on the budget amounts from your most recent paycheck.You can really use any numbers you’d like, but I would suggest you start with previously budgeted amounts to make it easy.
Remember, your final total needs to equal your Checking or Savings account exactly, sodon’t worry if you have a lot of money in the Leftover column – we’ll talk about a lot of fun {and responsible} things to do with that category in the next post!
Now that your personal MMS is prepped and ready to go, we can start using it right away.
How to Use an Account Tracker
Any time you make a purchase at the store, withdraw money, or make a deposit into your checking or savings accounts,immediately subtract from {or add to} the specific columns of your account trackers.
This keeps a running tally so you know what money is availablein each column to spend, which in turn, keeps you from going over budget. You may find it helpful to stash your Checking Account Tracker in your purse, so you know at any time how much you can spend on food, toiletries, clothing, etc when shopping at the store.
Totally committing to this real time tracking system will help you avoid unnecessary purchases with your debit card, but I think one of the coolest features of this system, is the ability to use credit cards too.
Using Credit Cards in Real Time
Credit cards are great to use every now and then for rewards and cash back, especially when you’re at a restaurant or need to order something online. I have purposefully included a Credit Card column on each of the Account Trackers to help use credit cards just like cash.
Whenever you charge anything to a credit card, that amount shouldbe taken out immediately from one or more of the category columns, and transferred to the credit card column where the money will be “held” until it’s time to pay your bill.When the credit card comes due, you will always have enough in that column to cover it…in full…every month.
Even though this might seem like a foolproof method to using credit cards, I do caution you to avoid doing this if you currently have credit card debt. Instead, focus on paying off your balance first.
Whew! That was quite a bit to take in for one post, but now you’ve come full circle and know exactly how the entire budgeting system actually works.
Don’t be discouraged if it takes some time to set everything up. Once you get into a weekly, and monthly habit of tracking everything, it will become second nature. I promise!
Related: How to Organize Your Finances
In the next step, we’re going to talk about how this system will help you reach all of your savings goals.Whether it’s paying down debt, saving for vacation, buying a new car to replace your rusty junker, or finally tackling that home renovation, the possibilities are endless because now you have exactly what it takes to succeed!
What system helps you stay under budget?
{Go to the next step: I Have a Budget….Now What?}
Getting your finances in order can be really overwhelming!
If you need more hands-on help, my friend Jessi is a financial rockstar and shows you step-by-step how to set financial goals, stick to a budget, and develop a concrete plan to attack that debt monster.
It’s all found in her course, the Real Life Money Plan, where you’ll get a printable workbook, in-depth videos and comprehensive worksheets to map out your entire financial future. I promise you will love her as much as I do! Learn more HERE.
