Do you find it easy to over-spend on everyday things that you purchase, leaving you short on funds to cover fixed expenses like hydro and insurance?
Here is a simple, yet powerful, solution that will help you take control of your spending.
First of all, let’s define every day spending, also known as variable spending. These are items such as groceries, gas, lunches and lattes, family fun and alcohol. Determine how much you spend in these categories on a monthly basis, making sure that the amount fits within your budget for all expenses. You can’t spend more than you make – a very simple rule for money management. Once you know your monthly variable spending budget, divide it by 4.3 to get a weekly amount. As an example, if you determine that you spend $1,600 a month on variable expenses, your weekly amount is 1600/4.3 = $372.
Open up a second unlimited checking account at your bank and attach your debit card to this second account. I have my clients choose the “savings” button for this account for all purchases. Next, set up an automatic transfer from your main chequing account to your second unlimited chequing account on a weekly basis. I find Fridays are the best day for this transfer, as it is just before the weekend when you spend much of the money on family fun, groceries and wine or beer. Use this account for all the above-mentioned categories, using your debit card for all the transactions. If you have a smart phone, you can set up your bank app and keep track of how much you are spending throughout the week.
Now here is the key – when the bank account is getting low (which will happen by Wednesday or Thursday before the next transfer), don’t go to Costco, eat out, or fill your vehicles up with gas. You see what is in the cupboard at home for dinner, and put $30 in your tank to last until the money is transferred automatically again on Friday.
This is a fantastic way to keep you aware of how much you are spending and living within your budget. The other reasons I love this method is that you don’t have to track every receipt, and it is guilt free spending because you have earmarked that money for that exact purpose.
This is something you can start right away; just make an appointment with the bank to open the second bank account. Yes, it will cost a few dollars a month to have a second unlimited chequing account, but you will save a lot more money in the long run. It is a fabulous step in taking control of your finances and living within your means.
Kathi Bridge is an independent money coach, educator and speaker. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.