Think about that for just a second.
How much of your money do you actually see? In your hands? In your wallet?
If I had to guess, it would be somewhere less than 5% of your total income. You can even include checks that you write in that amount. I’m guessing you write one or two per month. I own my own company, and I’m averaging fewer than 1 check per month.
Our money flows around us invisibly. The money we earn gets directly deposited into the bank. We set up automatic payments for our mortgage, loan payments, insurance, and anything else that we can automate. We swipe our cards and pay for clothes at the department store, groceries, and dining out. I can even pay for coffee at Starbucks now with my phone.
And is it any wonder that we feel like we don’t really have the control of our finances that we’d like?
Now, I’m not suggesting you switch to cashing your payroll checks at the bank and using envelopes in a drawer to manage your finances. I am suggesting that we do need to take extra steps to have control of our money, since we don’t carry it around in our wallets any longer.
- Track your spending weekly, rather than monthly. This one activity makes budgeting so much easier. Don’t wait for 4 weeks of expenses to pile up, look at it each week for 15 minutes. What spending decisions are you happy with? What spending decisions do you wish you’d made differently?
- Spend cash for discretionary expenses. If you give yourself $100 per week to spend, hit the ATM and use that cash for a week. It’s easy to tell at a glance how you’re doing at any point by just opening your wallet.
- Have a plan for ‘leftover’ money. If you don’t spend your weekly discretionary money, what can you save it for? The more compelling, the better. If extra money goes into the ‘Paris’ or ‘New Car’ fund, you’re more likely to have some leftover than if it goes into the ‘savings’ fund.