Monday, October 28, 2013

How To Protect Yourself From Yourself When Spending Money?

How many times have you set a monthly spendings budget for yourself?

For many of us the answer would be: too many times. And as that many times we went over budget.

The first solution that comes to our head when trying to solve the problem of staying within a fixed budget is to track all our spendings and compare all the time with the targeted budget. When we get close to the budget we start to make some cuts.

In theory this should work ... but experience shown us different. Because you earn more than you’re targeting yourself to spend, you may have the tendency to buy goods which you can afford based on your incomes, not on your fixed budget.

There is a simple three steps solution to this problem, and even if you might think of it as too rudimentary, it simply works!

The Envelopes Method

Step #1: reduce electronic pays to a minimum.

Avoid shopping on-line or use your credit/debit cards. Cards are your budget killers!
This is because you don't really feel that you exchange one of your goods (money) for some other goods when you press a button on a website, or when a cashier swipes your credit card through a machine and don't feels any lighter when you get it back.

Try to keep electronic pays only to the bare essentials like utilities bills.

Step #2: make envelopes with cash to spend per week.

Put in separate envelopes the cash you want to spend in each week of the month.
Don't be too optimistic and set a very low budget. This is a sure recipe for failure. Just set a slightly smaller budget than what you spent last month.
Leave your cards at home and try to live only with the money from the envelopes.
In this way you will see all the time how your physical money are less and less as you go through the week and you can take necessary actions.

If you saved some money in a week add them to the envelope of next week. This will be your bonus.

Step #3: re-iterate.

Don't expect to be successful from day one; practice is what makes us better.
At the end of each month see when you used electronic pays and decide if you can reduce them. Just keep in mind that electronic pays are the biggest threat to your budget.

Set a smaller budget than what you had before. Don't decrease it with more than 10%, a realistic decrease can be just 5%.


If you want to cut out on your spendings sprees then lose your cards and spend only cash.

Use a money management platform, just as Troosby to track how much you spent and on what, but limit the money you have available at you on a weekly basis and try to pay with cash – you don’t see the money leaving your pockets when you use cards.

That's it for today! Keep your finances under control with Troosby ... and envelopes :)

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