I have talked in the past about various methods I have used to manage our finances. While I have managed to grasp with great detail where our money is going with tools like Mint.com, we have not yet developed a good budget system. We still over spend each month, despite both of our buy-in to save.
The problem, as I see it, is that our budget systems are far too abstract. Working with digital numbers, it is hard to feel any concrete limits. Nothing prevents us from going over budget; it is so easy that we constantly did it without even knowing it. We needed a different approach.
This new approach is relatively simple. So simple in fact, that it seems crazy at first glance, a complete reversal of my standard operating procedure for ten years. We are moving to a cash budget.
Every month, I will take out enough money to cover our flex expenses – groceries, household goods, and personal purchases. This will make the budget tangible, a real thing that we can touch and feel.
It also creates a hard limit. When the money is gone, it is gone. We will not take any more out of the bank until the beginning of the next month. We will still have credit if we need it, but it will be only be used in emergencies.
My hope is that this drastic change will cause a shift in our thinking about budget. Once we break our bad spending habits, we will be able to construct new behavior that is beneficial. We’ll save more, be more stable, and hopefully be happier.
Wish us luck.
-That is all.