How to Use a Budget - Post #3

Now that we've walked through the steps of creating a budget (see here and here); we'll talk about how to use your new tool.

The purpose of creating a budget is to understand how much money you have available to actually spend so that you only spend that amount. Now you know how much money you can spend on eating out or buying clothes this month without getting into trouble. Although the real trick can sometimes be actually sticking to your budget. Let me point out that a budget that you don't stick to is a waste of your time. So how do you make sure that you're spending what you decided you should?

Although this is a little old fashioned, if you're having difficulty sticking to your budget here's a really helpful trick: Keep your money in envelopes for each category and only spend what you have in the envelope. Once your envelope for clothes is empty, you don't buy any more clothes until you earn more money to put in that envelope.

I'm obviously someone who likes technology, and I grew up on a debit card. But I found that it was difficult to keep our spending under control when my husband and I were both on the debit card for all of our purchases. So we moved to a cash only basis for our "free" money. This has been very beneficial for 2 reasons: We only spend the money we have on hand so we're sticking to our budget; and we frequently spend less than our allowance so we're able to save up for bigger "fun" items. Saving our unspent allowance is how we got the TV we have now.

A budget can help you to stop spending too much money, and it can even help you to stop spending money altogether on some items. If you find that your Starbucks habit just doesn't allow you to balance your budget, you could cut it out completely and stop spending money there.

Used correctly, a budget can be the tool that helps you to get your spending under control and truly manage your money.