At the close of each month, my mother sits down at the kitchen table and begins her favorite ritual, a process she has dubbed “doing the receipts.” This involves an enormous, time-worn shoebox, enough paper clips and rubber bands to satisfy the organizational demands of a small office for decades, and a handwritten record of every credit card purchase my mother has made since 1982.
Even as a child, the herculean effort was not lost on me – I would watch my mother as she spread what seemed like a hundred pages across the surface of the table (and on some occasions, the floor), carefully adding and comparing her own figures to the sum of charges on her credit card statement, collating the amount of money spent to the previous month, and drawing up prospective future budgets.
Though the advent of online banking and smartphones have largely rendered obsolete the paper and pen aspect of personal financial planning, my mother’s meticulous record keeping is a model around which I would recommend every consumer build their own budgeting habits. Below are a few simple tips to keep in mind as you navigate the world of economical living:
- Determine your base monthly income after tax – creating a realistic budget is much easier when you have a clear figure to work with. Utilize online budgeting calculators to figure out exactly how much money you are able to spend each month down to the penny, then begin to allocate appropriate amounts towards bills and savings.
- DO keep a handwritten record of cash payments, including lunches, movies, bookstores, snacks from a vending machine, and so on. You may be surprised at how quickly these seemingly small purchases can add up. Alternatively, you can take out a set amount of cash to spend per week. This way, you have a concrete cash budget allotted to each month, eliminating the possibility of accidental overspending.
- Credit card debt may seem overwhelming, especially if you happen to have multiple cards. Begin by selecting whichever card has the highest interest rate and paying as much as possible each month. Continue to pay whatever you are able on each of the rest of your cards (even if it is the minimum) until you have completely paid off the first card. Then move on to the card with the next highest interest rate and repeat the process. Simply continuing to pay the minimum on each of your cards will lead to paying far more in interest than you may realize.
- Try as hard as possible to stay under your spending limit. While each month will be different and unpredictable expenses may arise, putting leftover money towards your savings is always the best course of action. Just because you have it, you do not have an obligation to spend it!
- Remind yourself frequently of your financial goals, whether you are planning on buying a house, paying off a debt, or even retiring early. As trivial as it may sound, thinking in the long term can be an enormous motivator. Turning down unnecessary expenses quickly becomes second nature when you picture where that money is able to go instead.
Sticking to these rules can help you begin to build your savings, and remember – budgeting only becomes easier and more intuitive the longer you stick with it! And lastly, to my mother, Happy Mother’s Day! Might I suggest an accordion folder?