Conscious Growth.com

April 7th, 2008

One of the lessons I learned in college was money management. Particularly because I was really bad at it. In the course of 5 years, I racked up a good amount of debt with credit cards and student loans. I wasn’t managing it though and I started missing payments and over-drafting on my bank account. To fix my problem, I took out even more loans! Eventually, it all came crashing down and I knew I needed to make a serious change.

Understand your Position

At the time, I was living on a budget that was well above my income. I knew that. In order to live within a working budget, I had two options: 1) I could increase my income or 2) decrease my wants. To get out of debt quickly, I chose both.

The first thing I did was separate my needs from wants. Using a Microsoft Excel sheet, I created a ledger, five month forecast, and monthly pie charts to see where my spending was going. It helped my track exactly how much I would need for each week.

Using a Cash Budget

Once you know how much you’ll need each week, go to the ATM and one withdrawal. Take out only that amount of money. Then, divide up all the money into its appropriate amounts and spend only that.

The first month is the adjusting period. You can be flexible here. It’s OK. The first thing you may notice while on a cash budget is how fast it goes! If you can, give yourself some space and allow yourself to create a working budget. The important thing is to be aware of your spending habits and to live on a budget well below your income. If you have some serious debt though, you may not have the luxury of that flexibility.

An Easy Transition

Budgeting can be difficult for people who are new to it are used to spend a lot of money. To help make an easier transition into money management, I suggest trying the following:

- Collect Receipts. Have an envelope in your glove compartment that you can put all the month’s receipts into.

- Budget a little extra spending money. Give yourself cash that has no category. You can do whatever you want, whenever. It’s therapeutic. Believe me.

- Stick with it. People think that if they’ve blown the budget, they should just give up. That’s ridiculous. It’s the same thinking that got you into debt in the first place. Realize that its OK to bend the budget at times, but always choose to follow through.

- Keep one credit card in your wallet. Make sure you leave your debit card at home. Use the cash system and carry around one credit card for emergencies ONLY. If you think of emergencies as a extra value meal or a new stereo, leave it home also. Call someone if you have an emergency.

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