How To Slay The Spending Money Ogre Part 2

Are you working on a spending money log as suggested in Part 1? Nice. Keep going for the full month. A good appreciation for how much you spend on out of pocket expenses is the base from which you start the process of taking control of spending money.

No idea what a spending money log is? Or why it's important? Before continuing here, read Part 1. The background information in that post is needed to fully appreciate the process discussed in this post.

Focus On Weekly Spending

The key change that will bring your spending money under control is to start "paying" yourself the same amount of spending money on the same day every week. How much and which weekday are your choices that you make here and now.

A spending money log is invaluable in that it gives you insight into the daily spending habits of which you may or may not be aware. In addition to possibly bringing some surprises to light, a spending money log will help you answer these two key questions. Take a moment to take an initial stab at how your weekly spending money will work best for you. You can change your answers later.
  1. How much spending money do you need each week?
  2. On which day each week do you want to "pay" yourself your spending money for the coming week?
As an example, Lois and I "pay" ourselves our weekly spending money by cashing a check every Thursday. We picked Thursday because that is the day when we normally do our weekly grocery shopping. We prefer using cash for spending money since paying with cash is much simpler than using a debit or credit card, or writing checks. With cash there is no recording of transactions. In addition, it's very obvious when our spending money for a week is all gone. That rarely happens. We usually have money left over which is put in a jar and used to pay for our monthly visit to a salon. We call that "beautification day."

Keep Spending Money Separate

Once you have decided on your weekly "payday" and how much you will need each week, the next step is to set up a way to keep track of your spending money separate from the other money in your checking account.

Get a new, blank check register. If you don't have one on hand, your bank or credit union will probably give you one free. Write Spending Money on the front of the new register. This register will be used exclusively to record transactions that effect your weekly spending money.

There is no need to carry this new register with you. Keep it in a safe place at home.

What To Do Every Payday

Payday is when you set aside money from your paycheck that will be used for spending money until the next time you get paid.

After your paycheck has been deposited and recorded in your check register, count the number of weekly spending money "paydays" that occur between now and your next payday. For example, let's assume you have selected Monday for your weekly spending money "payday." On the day you get paid, count the number of Mondays from now until your next payday.

Multiply this number of coming spending money "paydays" by the amount of spending money you are "paying" yourself each week. This gives you the total amount of spending money you will need until your next paycheck. To separate this total amount from the rest of the money in your checking account, transfer the total amount from your check register to your Spending Money register.
  • In your check register, write a withdrawal entry for the total amount of spending money being transferred. Check the entry as cleared.
  • In your Spending Money register, write a deposit entry for the same total spending money amount. Check the entry as cleared.
With spending money separated from the rest of the funds in your checking account each payday, the balance in your check register will no longer be used for out of pocket expenses.

What To Do Every Week

Each week on your spending money "payday," pay yourself your out of pocket money for the coming week.

If you use only cash for spending money, as is recommended, "pay" yourself by writing and cashing a check for the full amount of your weekly spending money. This check is recorded in your Spending Money register so that the amount of the check is deducted from the total amount of spending money that is available until your next payday.

What About Using Credit And Debit Cards?

If you choose to use a credit or debit card for spending money purchases, keep track of how much of your weekly spending money is left by doing this each time you buy something.

Credit Card 

If you are not already, get in the habit of always asking for a receipt for credit card transactions. Use each receipt as a reminder to transfer the amount of each credit card purchase from your Spending Money register back to your check register. This will make the money available for paying the balance of the next credit card statement.
  • In your Spending Money register, write a withdrawal entry for the amount of the purchase. Check the entry as cleared.
  • In your check register, write a deposit entry for the amount of the purchase. Check the entry as cleared.

Debit Card

Just like using credit cards, always get a receipt for debit card purchases. Use each receipt as a reminder to enter each transaction in your Spending Money register the same way you enter each check you write. 

Making Adjustments To Spending Money

When you have spending money left over from the preceding week, what you do with this leftover cash is entirely up to you. Conversely, when you run out of cash during a week, how you make it to your next spending money "payday" is your choice. Both scenarios are to be avoided, if possible. Consistently having too much or too little spending money indicates that an adjustment is needed in the amount of your weekly spending money.
  • By lowering your weekly spending money amount to prevent consistent leftover cash, more money is made available to pay bills, make credit card payments, and to put aside for saving plans.
  • By raising your weekly spending money amount to prevent consistent running out of cash, the need to use a credit card to compensate for cash shortages is eliminated.
It is best to make adjustments to your weekly spending money, either the amount or the weekday, on a payday. Changing your spending money between paydays can be complicated and frustrating.

You Are Off The Roller Coaster

Congratulations! You are now in control of your spending money. By "paying" yourself the same amount on the same day each week, the spending money roller coaster between paychecks stops. And with each spending money "payday" never being more than 6 days away, you can better gauge your daily spending to dramatically reduce, if not stop entirely, the need to use credit cards for out of pocket expenses.

Isolating your spending money from the rest of the money in your checking account means that you no longer spend the entire amount of a paycheck before the next payday. With a consistent amount going for spending money, the amount available to pay bills, handle credit cards, plus set aside for large purchases and savings will also be consistent from month to month.

More Money Than Month Feels Good!

You may be pleasantly surprised to see the average balance in your check register steadily increasing from month to month. If this happens it indicates that you have successfully begun your transition from "more month than money" to "more money than month."

When the average balance in your check register is increasing, you may have to reorient your thinking from "I can't pay my bills!" to something like "OK, where can I put this extra money to work?"

What Else Is Possible?

By bringing your spending money under control you have opened the door to effectively managing all of your household finances. The activities that you do, or would like to do, with your money will be discussed in coming posts. After the separate tasks that encompass day-to-day finances are covered, we can begin to look at the tools that are available to help you get and keep your head above the financial water level.

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