Winning with your budget Part 2: The Three Best Methods to Manage Spending

Implementation is the key to winning with your budget. It is the difference between having a budget that succeeds and one that fails. When your budget succeeds, you succeed financially. When the budget fails, your financial progress takes the hit. In Blog Post #3, we laid out the format of implementation using the weekly spending model.

Now we want to discuss how to track spending. We are not talking about bills here. We are talking about YOUR spending. Categories like eating out, shopping, entertainment, etc. This is the spending related to you using your debit card, credit card, payment apps, etc. While payment methods have increased purchasing convenience thanks to the internet and phone apps, they have created a ‘herding the cats’ environment when it comes to understanding spending and staying within the parameters of a budget. Electronic payments make invisible what used to be quite tangible and obvious when cash and checks were the primary means of paying for the things we buy. The onslaught of credit card offers that hit U.S. households in the 1980’s started to make purchasing less visible (and less tied to whether you actually have the funds right now to pay for what you want, thereby putting you into debt). Now, there are countless means for payment. While these are certainly “convenient”, they add so much complexity that consumers give up trying to track spending from so many sources. Spending becomes blind, budgets fail, and you end up living paycheck to paycheck. Make no mistake — the convenience of payment methods was not designed for you. It was designed for the merchants. The easier it is for you to part with your money, the better it is for the one you are giving it to! We could do an entire blog post on how to simplify the payment method maze but, for now, let’s keep things as they are in terms of the methods you use, and instead help you succeed with your spending in spite of the merchants!

Keeping track of your spending is the single most important factor in successfully managing your finances. There are many ways to do this. For example, you can write down all of your spending, and when you get to your budgeted limit, you stop. You could also use one of dozens of budgeting apps, or maybe even your bank since many now have tracking tools. But nearly all of these options require more work than we think is needed. They fail because at the end of the day, who has time to track spending?

Here are the three best methods to manage your spending without needing to actually track it:

1. Cash Envelope System: This one is tried and true. You withdraw your budgeted spending money in cash, put in an envelope, and spend from the envelope. When the cash is gone, it’s gone. No additional spending can happen until the envelope is replenished next week (for weekly spending) or next month (for monthly spending). This is a simple, guaranteed success in containing spending, and no tracking is required. The ‘tracking’ is automatic as you see the dollars disappear. And you should. The whole idea is to prevent you from spending more than you have budgeted.

2. Electronic Envelope System: This is our favorite method to help you succeed with your spending. The electronic envelope system is a concept we have coined at Richer Than You Think that works the same as the cash envelope, except it also accommodates online and debit card purchases. With this system, your ‘envelope’ is actually a separate checking account with its own debit card. Like the cash envelope concept, you transfer (from your main checking) your budgeted spending into the electronic envelope, and spend from there. If you reach a zero balance before it is scheduled to replenish next week or next month, no additional spending can happen until the scheduled replenishment. This is another simple, guaranteed success in containing spending, and no tracking is required. The ‘tracking’ is automatic as you see the balance in the electronic envelope disappear. And you should. The whole idea is to spend what you have budgeted, just not more than that.

3. Mint Spending Budgets: Mint is a free online tool that is great for tracking spending. It automatically downloads your bank and credit card transactions, and it is both smart with its automatic category assignments and trainable with those unique to you. It is as close as we’ve seen (and FREE) to the electronic envelope described above. Mint allows you to set a budget for, say food/grocery/eating out. As you spend, and the transactions are automatically categorized to that label, Mint tracks the spending against the budget you assigned and tells you what’s remaining. So while the envelope systems don’t require any tracking, Mint tracks it for you. Your job is to make sure your transactions are categorized correctly, but this takes just a few minutes a day and is worth it! Mint has a phone app that shows you what is left in each of your spending budgets (aka envelopes). It’s a great alternative if you don’t want to have a separate spending account with a separate debit card.

The most important success factor in your budget is making your spending fit your budget. After all, you put that budget together for a reason. You told your money what to do for a reason. Maybe it’s because you want to stop living paycheck to paycheck. Or you want your hard-earned-money to work harder. Or you want to reach Financial Stability. Maybe you want to feel you are moving forward financially. Or you simply want to stop running out of money. Help that budget succeed for you by keeping your spending within your budgeted “fenced yard.” Use one of our favorite methods above, and enjoy the win.

The Key to Winning with Your Budget: Implementation

In Blog Post #2, I talked about your budget as your best financial friend. It’s also the boss of your money because you’ve assigned your Money In to specific Money Out line items such as bills, spending, savings, and debt. Now it’s time to put those assignments to work by way of budget implementation. I want you to pay close attention to implementation, because from my experience, it’s the #1 reason budgets fail.

Why do budgets fail at the implementation phase? First, what does a failed budget look like? Have you ever built a budget only to find yourself saying “what now?”, or find yourself running out of cash two weeks into the month, or overspending and just giving up altogether on trying to follow it? Have you found yourself at the end of the month adding up your income and expenses only to find that you spent more than your income? All of this looks and “feels” like a failing budget. But the budget didn’t fail. The implementation of the budget…also known as your actions related to your spending… failed. But once you know how to implement your budget, it will not fail you. So let’s get started.

Successful budget implementation depends on three factors: Cash Flow, Tracking Your Spending, and Trusting Your Budget. I will cover Cash Flow today, while Tracking Your Spending and Trusting Your Budget will be covered on my next blog post.

The reason Cash Flow is so important in successful budget implementation is that it shows you how your bank balance changes as your Money In and Money Out flow through the month. Most important, when you can see your account balance in advance, you have the ability to see in advance when you might overdraw your account. And this lets you make changes now to avoid the overdraft. (Remember, overdraft fees are a staggering $35-$40 for each one! As a side note, do not fall for overdraft protection plans, as they are simply debt disguised as help. Nor do you want your emergency fund linked to your account as overdraft protection. All these supposedly helpful tools do is enable over-drafting – if you don’t have them available, you won’t do it!)

So, seeing your cash flow over the course of the budgeted month is key to avoiding running out of money. Let’s take a look at how you use Cash Flow to successfully implement your budget.

Think of Cash Flow as a schedule of Money In and Money Out from the first day of the month to the last day of the month. It is a listing of the dates when money is coming into your account and when it’s going out of your account. Cash Flow also begins with a balance in your account, say today, which happens to be the last day of November. Conveniently list out when December Money In (your paycheck) and December Money Out (your bills) will occur, adding Money In to your balance, and subtracting Money Out from it as you go. While it’s easiest to do this on a spreadsheet, you can just as easily do it on paper. Nothing should get in your way on this is important step. In addition to bills, Money Out also includes your spending: food, shopping, commuting, flex items such as post office, dry cleaner, etc. It is typically this part of the Money Out section that causes implementation to fail the fastest. So let me show you how to prevent that.

Let’s look at an example of how Cash Flow guides you to a successful monthly budget experience. The implementation below is for a budget that has $2,000 in income and $1,975 in expenses – its profit is $25.

Remember the budget had a $25 profit? Notice your bank balance at the beginning of the month was $1,500 and at the end of the month was $1,525, after all of the income came in and all expense was scheduled to go out. The $25 profit is sitting in your balance at the end of the month!

Notice also the following:

  • Food/grocery spending as well as gas/commuting are weekly expenses in specific amounts to prevent running out of money before the month is over. This means you can’t go to Costco and spend all $500 of your December grocery money on 12/1, or you will overdraw your account.
  • Bills and payroll are listed in chronological order. This way, you can see how the bank balance changes as these line items hit the account. Notice on 12/4 that your bank balance goes all the way down to $10 after the heating bill is paid. While this is low, it is not overdrawn. But if any of the line items above it are overspent by more than $10, the bank balance would overdraw. This knowledge about the “low point” in your bank account is really important, and is typically a motivator to keep spending within your budgeted numbers.
  • I place line breaks between the weeks to to make the cash flow list easier to follow. Most important, breaking the month down into weekly segments…meaning 7-day increments…makes managing money week to week much easier. It only takes a few minutes on, say, a Saturday morning. All you do is make sure the bills for that week are scheduled, then know what your spending allowance is for that week, and you’re done! You do not have to look at your implementation schedule until the next Saturday when you do the same thing for the new week.

Let me address the “budget week.” I like budget weeks to begin on Saturday and end on Friday. Let me explain why, through trial and error, I landed on this crucial win with implementation.

Why Sunday – Saturday…the typical calendar week fails
Two reasons. First, your bank will not date your Saturday transactions until the following Monday. This means your Saturday transactions are going to show up in your bank as next week’s spending! This causes time, tracking and potential human error as you manually figure out which of Monday’s transactions are actually Saturday. Plus, since you can’t change the date of the transaction in your bank’s reporting function will not be correct. The second reason this typical calendar week fails is that Saturday…one of the most high-spending days of the week…falls at the end of your week when your spending money is probably gone. This sets you up for overspending, because the chances of you not spending on Saturday are extraordinarily low. I’ve tried it, and I failed.

Why the Monday – Sunday week fails
This weekly schedule fails exactly same as reason #2 in the Sunday-Saturday schedule above. Your weekend…when most spending is done…falls at the end of your week when you are likely to have already spent your money.

Saturday – Friday is the answer
This brings us to the magical Saturday – Friday implementation week. It works! It sets you up for success! Your spending is available at the beginning of the week, on the highest spending days of the week. It’s much easier to stay out of the stores during the week when you’re at work and focusing on family, school, homework, etc. I often spend a large portion of my weekly spending money on Saturday, leaving a little bit during the week for incidentals. I don’t even like going to the stores or spending money during the week. For me, that’s what the weekend is for, and as long as I stay within the budget I have for that week, I am guaranteed to win. Oh, and the other reason this schedule works for implementation: bank transactions automatically show up in the correct week. Zero time is needed to adjust transactions or manipulate spending reports.

Client Interview #1

When I decided to write a blog, I knew I wanted to include client interviews. I started Richer Than You Think LLC over 10 years ago knowing that I wanted to help individuals and families succeed with their everyday money. This meant helping them achieve what I call financial stability. I felt I had the education, experience and mechanics in place to provide a necessary and valuable service FOR my clients. And to a large extent, I did. But the insight I’ve received FROM my clients has added perspective, richness and education that has made me better as an advisor, coach, and business person, and is simply priceless. I am so excited to share my client interviews with you.

Here is Client Interview #1, with Jayki.

RTYT: How long have you been a client?

Jayki: 3 years.

RTYT: What made you choose to seek budget help, and why did you choose Richer Than You Think?

Jayki: My financial life felt unmanageable. I didn’t have the tools to rein it in. I needed a professional’s opinion on what to do. I found RTYT from a trusted referral.

RTYT: Had you tried budget help before?

Jayki: I had taken a course from another personal finance company, but no professional help or coaching.

RTYT: You were a RTYT client for about a year, took a break, and then came back. How did your experience differ between the two segments of service/coaching?

Jayki: When I became a client the first time, I wasn’t ready to take it seriously. I knew the service was essential, but I wasn’t ready to be accountable. I wasn’t ready to scale back my lifestyle to get my finances in order, which meant attacking my student loans. I came back when I reached the point of really being ready to focus on financial stability, which meant putting an end to avoiding the loans. Once I made that decision, adjusting lifestyle was easy because the financial stability was more important.

RTYT: What makes this service work for you?

Jayki: Accountability, coaching, tools and personal service. My annual budget and weekly implementation plans provide reference, spending boundaries, and dollar assignments. This helps prevent drifting off into the gray. I feel like our work together is a partnership; we celebrate victories together. The personal nature of the service speaks to me; your firm genuinely cares about my progress. This personal aspect is really helpful; I’m not alone.

RTYT: We focus on helping clients achieve what we call Financial Stability (No debt outside of mortgage; Fully funded emergency fund; Meaningful, regular savings into retirement). How important is Financial Stability to you, and how different does it feel from building wealth?

Jayki: Financial Stability comes first. It’s like learning to crawl before learning to walk. You can’t build wealth if you can’t manage your day to day finances. Financial Stability is real and now vs. a far-off dream. It’s an action step toward wealth. But it’s also necessary if you don’t want to build wealth. It stabilizes you financially so you can make your own choices going forward. The beauty of your service is it’s fundamental for everyone: financial stability strategy, budget, implementation, celebration of achievements.

RTYT: What goal are you currently working on?

Jayki: It was originally paying off my student loans, and we made some important progress on the smaller ones. But since the rest are large, it will take several years. So I’m building my emergency fund to feel more protected. Then all of my surplus will go to the remaining loans. I’m doing this while not feeling deprived in my life. I was terrified of this originally which is why it took long for me to seek help. You have shown me that I can have both. That’s rewarding and freeing.

RTYT: How necessary is the coaching to you?

Jayki: It’s invaluable to have a coach to reach out to. You’re not a far off spreadsheet or entity I’ve never met.  As I said earlier, you care about my progress. In fact, you were the first person I wanted to tell when I paid off one of my loans! Not everyone needs coaching, but I do. For me it’s really useful.

RTYT: What’s next for you, after you reach financial stability?

Jayki: To start learning about investing.

RTYT: Sometimes it can seem hard to spend money on budgeting/financial help if you feel your finances are out of control. Can you speak to the value of the service relative to the price?

Jayki: Personally, I think it’s a steal for the value I get. Can’t put a price on peace of mind, and that’s what this service provides to me.

RTYT: What else would you like to share with readers?

Jayki: Whatever your fear is in terms of getting your finances in order and moving to financial stability, just reach out and have a conversation. RTYT is so open, warm and inviting. It’s worth looking into vs. staying silent and in fear. Plus, they are willing to go the extra mile with any situation. Also, I would like to meet other clients. I thrive on community, and having a community around this subject, where we are all pursuing Financial Stability together, would be really helpful and positive.

I hope you’ve enjoyed reading Jayki’s perspective about the value and importance of fixing your finances, and seeking help to do so. Even if all you need is help putting a budget together. Or you need help prioritizing what to do first. A financial coach can get you on track efficiently. Don’t be afraid or intimidated. I always say, take a step. Maybe getting help is the best next step for you.

Jayki, thank you for being so generous with your time, and for your willingness to be interviewed for my blog.

Your Budget is Your Financial Best Friend

Whenever you are trying to fix or change what’s happening with our money, the most important thing you can do is to create a budget. It tells you exactly what you need and can do with your money month to month. It’s honest. I call it the boss to spending; and to me, it’s my best financial friend.

The budget tells you where you are starting from. It answers important questions that enable you to make decisions about your day to day handling of money. Questions like, “Am I living within my means?”, or “Are my expenses higher than my income?” or “Do I have subscriptions/recurring expenses I’m not using?” or “Do I have room for savings or a special purchase?”

When you create your budget, you suddenly have information. You have knowledge. And as the saying goes, “Knowledge is power.” You now have the power to make decisions with your money that will resolve issues, improve your financial condition, and allow your financial dreams to start becoming goals. Here’s the key: doing a budget is not difficult, should not be intimidating, and requires no special technology.

A pen and paper is all you need to write out your budget. It’s the simplest, most un-intimidating way to do a budget in my opinion. But there are seemingly infinite (free) resources available on our computers (spreadsheets and templates) or online (budgeting tools) to help. If you have access to and are comfortable with technology, it can be an efficient approach, depending on the technology you choose.

I find the most efficient technology approach to be a spreadsheet due to use of mathematical formulas for totaling, and the ease of modifying, adding or deleting line items. Online tools and templates can be helpful; however, I find most to be too detailed, causing the process to take too long and the resulting budget to be filled with far more line items than necessary. I know from my own experience and that of my clients, that the simpler the budget, the easier it is to follow. For example, you only need one line item for food/grocery, and it should include non-food grocery items like paper products, toiletries and cleaning supplies. And it should include eating out/ordering in. One line item for food/grocery is easy to track and gives you spending flexibility within that category.

Whatever method you choose to create your budget, the important thing is to start. I can assure you, you will feel a sense of increased control over your money with every line item you document.

As you put your budget together, remember that every budget has these three sections: Money In (Income), Money Out (expenses and savings), Balance (profit or loss). You are living within your means if your Money In is greater than your Money Out, meaning your budget is balanced with a Profit. You are overspending if your Money In is less than your Money Out, meaning you have a Loss. Your job every month is to plan your budget so that you are living within your means. The resulting Profit is what you put towards your financial goals. It’s that basic.

The bigger your monthly profit, the faster you achieve whatever financial goal you are working on. The more you spend, the less profit you will have, and the longer it will take to reach your financial goal.

But what if your budget shows a Loss? What if Money In is less than Money Out? You are living BEYOND your means, and your budget is not balanced. You are falling backwards financially.

There are two options to turn the Loss into a Profit: reduce expenses or increase income. Start with reducing expenses. How? First, if you have debt, bring all of your debt payments down to minimum payments only. Don’t pay extra on debt just yet. Next, in my experience, we as a society tend to spend more money than necessary on food, shopping and subscriptions. Reduce your spending here. Go as low as you think you can. Then, look at luxuries like lawn service, cleaning service, etc.

If you are still showing a Loss, look to increase your income by reducing the number of deductions coming from your paycheck or getting a second job (my least favorite way of making your budget balance). But focus on expense reduction first; it is usually the answer you need. In extreme cases, you might need to cancel things like the cable bill, or delay paying unsecured credit cards.

Once Money In is equal to or greater than Money Out, you have a balanced budget. Congratulations! Hopefully, you have a little profit (my first budget had a profit of just $5). Take a look at your work. Doesn’t it feel good to know your bills can get paid, and that you know exactly what your spending can be in order to live within your means? I found this knowledge really empowering when I did my first budget. And I still feel it today. I hope you do, too.

In a future post, I will talk about how to build key components into your budget that move you to what I call financial stability. But for now, you are in control under the guide of your budget. Trust it. Let it be the boss to your spending. In return, it will also be your financial best friend.


I am glad you’re here. This is a blog about personal finance, and how fixing your money enables you to enjoy your life. Let me just list some of the reasons…