If someone were to ask me to give them one piece of advice regarding their money I would tell them one thing (and I wouldn’t hesitate at all in telling them): Get on a written budget.
And if that someone wanted a tip about budgeting specifically, I would tell them one thing (and I wouldn’t hesitate at all in telling them): Give every dollar a job.
Some other budgeting tips may be to make it simple, ensure that both spouses (if married) are on board, write down everything, etc. But the grand-daddy of all esteemed budgeting strategies is give every one of those grubby little dollars a job to do.
In the old days, devoted budgeters would use envelopes to assign jobs to their dollars. That was pretty straight-forward. That dollar, sitting in the “groceries” envelope, knew exactly what to do, and when to do it.
In our much-more-modernized society (not so much improved on the budgeting front, I might add), we don’t seem to manage too well with a lot of cash. I personally have tried the envelope system with a few select spending categories (groceries was the big one) and failed miserably. I would forget the envelope. Have I ever forgotten my debit card? Not one time.
But must our dollars go unemployed?
Heavens no. Quite the contrary. With spending apparently easier now than in the past (access to credit), it has become even more important that we assign each dollar that comes into our hands a job to do for the month.
For instance. Let’s say that $2,000 comes into your hands during the month. You take every, single, solitary dollar and you assign it a job. Some will go toward rent, and do their job in the month. Other dollars will go to savings, where their job is to recruit new employees and train them to do the same. Some dollars have the job of just being “ready” for an emergency. You’ll have some dollars that sit around for six to twelve months before finally doing something (Car Insurance Premiums, and Christmas come to mind).
Every dollar still does something. No dollar goes unassigned. Ever.
Well, almost never.
You might consider a realistic unemployment rate for your personal economy. Is unemployment better? Certainly not. But it’s realistic. And I’ve found too often that when people are unrealistic with their budgeting, they crash and burn. They give up. Why? Because you can’t do unrealistic things when you’re living in a brutally realistic world.
So what does an unemployed dollar do? Well, my wife gets a few of them, I get a few of them. And we can basically do whatever we want with them. They’re unemployed. They might go buy a book for me from Amazon.com, or some protein powder. Julie may purchase some crochet hooks, or a new shirt. It really doesn’t matter to me what she buys. She doesn’t even have to tell me when she has. Unemployed dollars don’t report to any boss except themselves. (Because of our habit of budgeting, she tells me anyway, but it’s not required and that’s the important point).
When you’re employing every dollar of your personal economy, make sure to unemploy a few too. It will more closely align your ideal world of money with the real world of money.
Where do you eventually want most of your dollars working? In the Savings Department. In that department they’re extremely useful. They find other dollars to employ on their own, and teach these new dollars the ropes (find more dollars, and teach them to find more dollars). The Savings Department is a beautiful thing.
Where do you absolutely need dollars? In the Emergency Department. These dollars aren’t there to find other dollars. They’re simply in charge of your Disaster Relief Plan. They maintain it. They make sure it’s functioning. They shouldn’t be employed in other departments. And they should never, ever be unemployed.
Because we’re in this technologically progressive (and fiscally-irresponsible) society, you need to use something that will allow you to assign your dollars their jobs with ease. I use a personal budget application that has worked well for me and my wife. We know what dollars have come in:
* Birthday Money (these dollars are unemployed for us)
* Found-on-the-Sidewalk Money
* Sold-Something-on-eBay Money
* etc, etc.
And we assign them jobs. This one budgeting tip will do more for your finances than any other. I guarantee it.
Your Next Step
Budgeting is not restrictive. You won’t be spending less, you’ll be spending right. So what do you have to lose? Except all that debt and stress?