How one simple number is useful in controlling spending
My Story: A Different Way to Budget
contributed by Karen
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The hardest part of being fiscally responsible is controlling spending, sometimes no matter what your income level is. A method I really find useful is to calculate your daily variable spending allotment.
Sounds complicated, but it's not. Find your monthly take home pay or net income after taxes. Subtract off all your fixed expenses, such as mortgage or rent, insurance, child care, automatic savings (I am a big believer in automatic savings and invest first), etc. Also, subtract off a buffer amount for unexpected expenditures like the $2,000 I just spent to get my car fixed. Ouch! You can look at your past spending to take an educated guess at the unexpected amount.
Now, take the monthly amount and divide by 31. This is the daily amount that you have to spend on all the variable expenses, such as food, gas, entertainment, clothes, etc. Keep this amount stuck in your head. You can either choose to only spend that amount (or less) daily or you can keep a running daily total and save up excess for bigger expenditures.
Let's say your average daily expenditures are $50. Monday and Tuesday you didn't spend any money. Now, you have accumulated $100, so on Wednesday, you can spend $150 on groceries. Or, if you know you want to go clothes shopping with friends on Friday, you could consciously not spend money on the days leading up to it, so you have an excess.
So why is this method any better? Because I have a good mental picture of how much I can spend in one day and it helps me control my purchases without having to keep track of budgeted amounts for each category. It also makes you plan ahead and think before you buy. I plan a budget at home too, but I don't have my computer or spreadsheet with me when I am in a store or out with friends.
This method gives me one simple number I can keep in my head and write in my calendar. So, everyday I write in my little pocket calendar that is stashed in my purse how much I am plus or minus for the day and what my cumulative total is. I figure the balance in my head and just round all numbers up to something that is easy to add mentally. This one simple number keeps my spontaneous spending in check and helps with controlling spending.
Debt from my past is preventing me from saving for my future! Tell us: Yes, debt is hindering my ability to save! or No, debt is not a problem but I am trying to get ahead financially!
"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 MyStory@stretcher.com.
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