If you are a couple who both use the same account or even dealing with separate accounts and checkbooks, your goal is to control your budget with proper maintenance. You and your spouse or partner will have to design your own system, but it should include the following five principles so you’ll spend only what your income allows according to a predetermined plan.
A – Assigned accountability.
Each of you needs to have your own areas of budget responsibility. Someone needs to be in charge of paying the utilities and the rent or mortgage. Someone else may be in charge of the food, clothes and entertainment budget. You both might be responsible for gifts, vacations and so on. It’s not important who has what responsibility but rather that each of you understands what your accountability is for the budget.
B – Immediate feedback on how actual spending compares to planned spending.
This is similar to operating out of a cookie jar or an envelope. When the envelope or cookie jar is empty, you should stop spending. Your system, whether it involves a check register, literal envelopes or another system you design, should likewise give you immediate feedback on how you stand against your plan. My wife has a budget amount for which she’s responsible in our family, and she enters that in her checkbook at the beginning of the month. She can look in her register at any time and tell how she’s doing relative to our original plan.
C – Strict limitation of credit card use.
Credit cards should be handled just like checks. When cards are used, they’re entered in your check register as a check would be. Under the check number you merely put Visa, MasterCard or whatever card you use. Then you fill in the store at which the card was used and the amount, which is deducted from your bank balance just as if you’d written a check. That way, you’re effectively setting aside the money to pay the account balance in full at the end of the month.
D – Accumulation of all excess income.
If money is not spent by the end of the month, it should be put into a savings account or some other type of account (such as a money market fund) that can be used to make planned purchases. It can even be used as a reward fund. Understand, however, that this is money left over only after you’ve paid all your bills, including taking savings or investing out of your cash flow as a first priority. If you’ve already done that, the excess left in the checkbook really is underspending that can be used as you desire.
E – Flexibility.
It will take at least two years of living on a budget before you feel comfortable with it. Once the budget has been established and lived with, however, living within your income is extremely easy. But because circumstances change, a budget must be flexible. If you find you budgeted too low or too high in an account, the budget can be adjusted during the year.