15 August 2012

Separate Money

If you struggle with budgeting physically divide your money. Some very organized and disciplined folk can do this on paper. Their Spending Plan will show an amount in one column and they can quite happily carry it over to the next month. But there are others who need a more physical separation of money because if it's there it's meant to be spent.

Here are there techniques you can use to separate your money:

1.  Envelopes.This is one of the oldest forms of budgeting and it works. When you get paid simply withdraw the total amount you need for your spending for the week/fortnight/month and then divide it into various envelopes, according to your Spending Plan. You might have an envelopes for groceries, petrol, phone, tuckshop, kinder fees, clothing, electricity, gas etc. That money is then used to pay for those items. When it's gone, it's gone and you have to wait until the next pay day to spend from that category.

2.  Bank Account method. This is similar to the Envelope Method, using different bank accounts. You might have a general household account where you deposit the money for every day expenses, a savings account to use as your Peace of Mind account for those large, irregular expenses (replacing the washing machine, dental work etc), an account for special occasions such as Christmas and family holidays and an account for their Emergency Fund.

3.  Direct debits or payroll deductions are other methods that help you to set aside funds for purposes other than immediate spending. You can set them up yourself to cover the bills (mortgage, utilities, loan repayments etc) quite easily. The money is allocated as soon as your pay hits your bank account and what is left is yours to spend (or save or invest).

1 comment:

  1. A friend of mine had a separate envelope just for spending at Bunnings 'cos the whole family loved that shop so much!


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