When it comes to budgeting, there are two camps: those who keep track of what they spend and balance their checking accounts promptly, and those who keep putting off these tasks until tomorrow. Dayana Yochim of Fool.com wrote an easy-to-follow and systematic guide to govern everyday spending for the procrastinator.
Step 1: Take a snapshot of your spending
Be aware of your own spending habits. People who spend using their credit or debit card may review raw data from monthly statements. Those who pay in cash can write down their daily expenses. Using a spreadsheet, categorize your expenditures and be shocked at how much money you are throwing away.
Step 2: Plan your next shopping spree
Once the initial shock recedes, start working on your “spending plan.” Make a list of all the important purchases you need to make in the next three to six months, including physical purchases or financial plans. This simple list will serve as a tangible reminder of your money goals and keep you focused on what to spend on.
Step 3: Do some simple division
Identify what items on the list will run you on a monthly basis. Divide the total amount for that item by the number of months until you need them.
Step 4: Set up a no-brainer savings system
Keep your cash out of your spending reach. Create a separate savings account from the one you use for daily expenditures. In Step 3, you already computed how much you need to set aside monthly. Get help from your bank and set up automatic recurring cash transfers from your main account to the separate savings account.
Step 5: Stop mindless overspending
Use the “envelope” method of budgeting. Compute a reasonable weekly amount you will allow yourself to spend on (food, transportation, housing, entertainment). Create envelopes for each category and put the allotted weekly amount per envelope. Once the cash on that envelope is depleted, so is your stipend for the week.
