There are several ways to make sure we follow our spending plans. All of them involve some type of tracking (or monitoring) of our spending. Basically, they fit into two categories: ledgers and envelopes.
Ledgers are the most traditional method. With a ledger, we keep track of our spending in writing, on a chart with columns for different categories of spending. If we keep a monthly running total for each category, then we’ll know if we are spending more or less than we planned.
There are many types of ledgers. Some are very detailed and complex, while others are quite simple. They come in different forms, from booklets to calendars to checkbook registers. There are ledger forms that focus on just one week at a time. Some people prefer to design their own ledger form to meet their particular needs. Computer software for managing personal finance is also just another type of ledger, with the advantage of having the adding and subtracting done by the computer! Contact your Family Resource Management specialist (pdf) or your local Extension Office for examples of ledgers.
The other major way of making sure we follow our plans is the time-honored envelope method. This is usually the best method for those who do not use a checking account. Even for those who do use a checking account, envelopes can be useful for tracking 3-6 categories of flexible expenses. With the envelope method, we actually place the correct amount of cash in an envelope, and stop spending when the cash is gone.
For example, if we allow $30 for “fun” this month, we put $30 cash in an envelope labeled “fun.” When we go to the movie, or bowling or to the video arcade, we take the money out of the fun envelope. When the money is gone, then we’re done spending money on fun for the month.
A big advantage of the envelope method is that there is no adding and subtracting. A second big advantage is that we can actually see how much money we have left for a certain expense. It can be easier to follow a plan when it is very visible!
Keep testing until you find a method that fits your style. We know that how we spend our money is a very personal thing. Likewise, the method that works best for checking up on our spending is also very personal – we need to find a method that fits our strengths and weaknesses and works in our daily routine. If you try one tracking method and find yourself unable to stick with it, then try another method. Sometimes modifying an existing tool or combining a couple of methods is the best answer of all.
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