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If you’re operating from a cash budget in key spending categories, chances are you go to the bank each pay period and withdraw a certain number of 20’s, 10’s, 5’s, and 1’s. Then you distribute the bills to envelopes or your wallet sections based on your pre-determined budget amounts. From then until the next pay period, you spend accordingly but don’t necessarily track where each bill or coin goes.
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Image courtesy of FreeDigitalPhotos.net [5]
This method works fine for many people. They don’t see a need to worry themselves over the destination of each cent as long as it’s been taken from the correct envelope. But there are occasions when specific tracking is advantageous.
For instance, let’s say I’m finding that my grocery budget is running out several days before payday. By tracking my specific cash expenditures, it might be easier to discover where that category is hemorrhaging. I may examine it at the end of the month and find that I’ve been shopping more frequently at grocery stores where prices are higher or that I’ve been making a lot of “emergency” trips to the closest store because I’m not planning meals ahead of time. Seeing those trends can help me adjust my habits and stretch the grocery budget.
Or imagine that your entertainment envelope is getting depleted really quickly and you’re not exactly sure why, but you suspect it may have to do with the Starbucks drive-through window on your way to work. In this case, you may just want to track a subcategory. Rather than recording every cent spent on entertainment, just keep a list of what you spend on coffee. If at the end of the month you find that $30 of your $50 entertainment budget was spent on Caramel Macchiatos, then you have your culprit.
Tracking each dollar can also be really helpful when you’re revamping your budget, because it gives you a realistic view of exactly where you’re spending and what adjustments you can make.
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In the photo above is a printable spending log [7] that fits perfectly inside the sections of my cash envelope system wallets but could also be kept inside a paper envelope. You can find it in my Etsy shop [8].
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To learn more about budgeting, visit Melissa’s blog www.atimeforeverything.net [10].
