My Story: Baggie Budgeting

contributed by Karen Smart

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You know the drill. You're at the supermarket checkout and reach into your purse only to find no cash inside, so you put your purchases on the credit card.

How did that happen? You "budgeted" carefully for groceries this week, knew exactly how much you had to spend, and you still ran out of money. Oh, that's right! You came back to the store twice for extra milk, bread and fresh produce, which you didn't plan for when you first did your budget. Oops. Would you like to know how to avoid getting yourself into the same mess again?

Prior to my foray into better money management, there was a common occurrence of "robbing Peter to pay Paul" even with the small amount of money I had to manage each week. I knew I had a certain amount each fortnight to spend on groceries, but there would always be that "fantastic" sale on nappies in the first week of the fortnight, so I'd stock up. This left me with a drastically reduced sum for groceries in the second week before payday, so I'd "top up" the grocery money with purchases made on the credit card. It was a vicious cycle.

One day, a light bulb went off. Surely the answer to my problems would be to figure out a way to siphon the money off into various "piles" so I wasn't inadvertently using grocery money to pay for child care, or paying for my (occasional) lunches out with money I needed for the water delivery man.

And so the idea of "Baggie Budgeting" was born. No fancy spreadsheets, no hours spent pouring over a personal ledger and certainly no more "Oops" trips to the supermarket. In fact, all you'll need is a package of baggies.

Begin with your next grocery-shopping trip. Buy a box of the "mini" size baggies, bring it home, and set it aside until after the kids are in bed and you are able to relax with a nice cup of hot chocolate.

Next, collect your supplies. Bring your baggies, a pen and some scrap paper to the table. On the scraps of paper, begin listing your expenses. For most people, the largest amount would be the mortgage or rent. Be realistic. If you regularly spend $120 on groceries, then write down $120. Include incidental expenses such as gifts, donations, leisure, restaurant meals, clothing and footwear, the works. There'll be room for fine-tuning later. For some, the budget will be in the red. That's okay too. I know what you're thinking. Where do the baggies come into it? Bear with me.

When you have a realistic list of your expenses, hopefully in the black, pat yourself on the back. The "hard" part is over. Now get out those baggies! Take enough out of the package to correspond with the number of items in your expense list. Write each item on the front of one baggie with permanent marker. In my case, I have six main expenses that include Groceries, Child Care, Water Delivery, Study Fees, Grocery Slush Fund and Milk & Bread. What is a Slush Fund? What does Milk & Bread mean? More about that in a moment.

On your next payday, go to the ATM and withdraw the total amount of cash needed to cover your expenses. Yes, all of it. Go straight home with your money. Take out your expense list and your labeled baggies. Start with the biggest expense. Peel the correct amount from your cash pile and "deposit" directly into the relevant baggie. Repeat with remaining amounts.

With the filled baggies, find a safe spot to "hide" them for the time being. Some worry about the security of having large amounts of cash in the home, but you can alleviate some of the worry by investing in a cheap lockable cash-box, or trying some "alternative" means of hiding the cash. Just make sure not to store all of the baggies together.

When grocery day comes around, find the Grocery baggie and put that bag only into your purse, leaving the rest hidden at home. The idea is to only take with you what cash you need for that day.

After a while, it will become second nature to siphon an entire pay-period worth of money into the baggies (which are re-usable and hold coins better than envelopes). No more heart-seizing moments in the middle of the grocery store when you realize that lunch out last week with friends accidentally dipped into your rent money because you forgot what the money in your purse was allocated toward.

A quick word on Grocery Slush Funds and Milk & Bread baggies:

The Slush Fund idea was built into my regular budget after realizing that whenever the really "good" sales came around, I never had enough ready cash to buy the amounts I really wanted, unless I dipped into the regular grocery budget for that week, which would leave the following week's budget greatly reduced.

I simply shaved $20 per payday and put it into a separate baggie. It's nice to know it's there in case an incredible sale comes along, but you have to remember to slowly build it up again as you use it. My Slush Fund currently stands at $100. By the first week of December, I'll have around $500 to spend on Christmas groceries and presents.

"Milk & Bread" is simply the leftover cash after you've bought your weekly groceries. Budgeted $100 but came in at $70? Put that $30 into Milk & Bread for those inevitable "side trips" to the store. Somehow it doesn't seem so bad knowing you've already allocated money to pay for it, and if you end up with a surplus at the end of the pay period, you can treat the family to pizza and put the rest toward paying off the biggest debt.

Karen Smart is a stay-at-home mum, frugal amateur, part time student and a rather ordinary cook! She lives in Australia with her husband and three children, Jake (6), Brandon (4.5) and Megan (3).

"My Story" is a regular feature of The Dollar Stretcher. If you have a story that could help save time or money, please send it to

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