Where is your missing money?
Image by Ano Lobb
We all have missing money. You get to the end of your week and you know you had enough money to pay for everything you needed, but somehow you are coming up short. Where is your missing money?
Look, I have been talking, writing and lecturing about personal finance for years now and it still happens to me. I know exactly how much extra money I have in my various accounts. I know that we deposit extra into our main bank account to ensure we don’t overdraft. I know we have extra paychecks a few times a year so I know there is technically extra in the account we pay our bills from. So, I spend it because I know it is there. That is where my missing money is; living it up outside of my budget.
My guess is you have a few dollars floating around outside your budget. We all do. This problem arises when you allow money to sit idly in an account somewhere doing nothing. It will run away from you when you aren’t paying attention. Money wants to be spent, or used in some way and it will find a way to get what it wants. What can you do to keep your hard earned dollars from becoming missing money? I am glad you asked.
Give your money something to do.
The secret to keep your money from going missing is to give it something to do. You money, like most of us, wants to feel like it has a purpose. You need a plan for all of your money, give it something to do. It doesn’t matter if it is paying off debt, paying for your bills, or being put in a nice quiet interest bearing account or investment to make more money for you.
Alright, the metaphor has gone far enough. I recommend you automate everything with your bank to make sure all of your money is going somewhere and doing something. Here are a few ideas.
- Recurring bills that are the same each month. (mortgage, car loan, insurance etc…) — Have an account where money goes to pay these bills that you can’t spend from. Each month set up an automatic payment with your bank to pay these bills’ total balance each month.
- Recurring bills that are not the same every month (utilities) — Call each of your utilities and see if you can make them stable. Many utilities will let you pay the yearly average of your bills all year. That way you know exactly how much you are going to pay each month.
- Any money left in your budget — Use it to pay off your debt if that is your goal, or put it in an interest bearing or investment account so you can’t spend it. That way it isn’t in a place where you can spend it on frivolous things.
Following these types of ideas will keep you from asking “Where did my money go?” It just won’t be available to spend.
What other ideas do you have? Tell us in the comments.
Envelope budget
Envelope budget system
My wife and I often get asked how we manage our budget on a practical level. It is all well and good to have a piece of paper somewhere telling you how much money you are supposed to spend each month, but it is much more difficult to actually manage to that budget. There are many ways this can be done. Mint.com‘s budget system will track all of your spending categories and can even alert you when you go over budget. Some people do this manually with a spreadsheet or by keeping all of their receipts. We use an envelope budget. We pull cash each paycheck and put that money into envelopes.
These envelopes correspond to various categories of our spending and when the envelope is empty we are out of money for that particular category. If there is no money in the “Eating out” envelope we eat at home. Or at least we should, we aren’t perfect. Using this method makes all the money spent more tangible, you think more about each decision to spend. It also helps us to ensure we don’t go over our budgets because in theory we shouldn’t be using our debit card, where spending is much easier to lose track of .
Advantages to the Envelope budget system
- Spending is easier to track – As I mentioned above, you know exactly how much money you have left in a particular category. You can all so put your receipts in the envelope to replace the cash to know exactly where you spent the money.
- Theoretically impossible to break – If you only spend the money that is in the envelope you will never go over your budgeted amount.
- Money easily carries over to next budget period – Money not spent during the week or month carries over ino the next time period. This allows for visual savings or if you need larger amounts like for a family hair cut.
Image by kgnixer
Drawbacks to the Envelope budget system
- You don’t always have the right envelope – We have many times decided to go out to eat after church but we didn’t bring our eating out envelope. Now we have to decide what to do? Will you deposit the money you spent from your envelope?
- You need to pull cash regularly – It is inconvenient and we often forget to pull the cash so we end up using the debit card and trying balance that by not pulling the full amount of cash.
Envelope budget apps
These are from the Google play store. Sorry I don’t use iOS but there must be some out there?
How do you manage to your budget? Are there any good apps you can recommend? Tell us in the comments below.
Improve your Budget
Photo by hisks
Great so now you have a budget written down and you are all ready to have your spending under control. How can you improve your budget? Pay attention to it for starters. The biggest mistake people make is to ignore the budget they have just put together. It is easy to assume that everything will take care of itself now that your monster spread sheet is put together or that you have set everything up on mint.com. But, alas, it simply isn’t that easy.
I will let you in on something, even if you used my budget template as I suggested, you forgot something on your budget. There is a bill that will come due that wasn’t part of your initial tracking period. That is OK. You will just need to adjust your budget now. Is it ok to change your budget? If it is intentional, absolutely. The problem arise when you simply overspend, without planning. You will need to adjust your budget several time until you have it to a good place and then you will, hopefully, get a raise or something else will change in your financial life that will require you to change or even rewrite your budget.
Understanding that your budget is a living document will help you not stress out when things come up that you require you to make adjustments.
What could I have forgotten?
- Did you put money aside for the Holidays? That is one of the biggest times to destroy your budget. Save money for travel, gifts and extra workout equipment to get rid of those holiday meals meals.
- Bills that don’t come due every month; Car insurance, homeowners insurance; subscription fees.
- Do you have an emergency fund? Cars need repairs, hot water tanks blow up. If you don’t want to blow your budget you need to have money put aside for these things, they will happen.
- It also helps to give yourself an allowance so you have some money to spend when you want something. Leaving yourself out of the budget will lead to burnout.
What else can you do to improve your budget?