Starting today, I'm reverting back to my old system of Baggie Budgeting. I know, everyone and his dog does their household budget this way, but when we moved into this house a couple of years ago, we switched to a predominantly credit-based system, so there was very little 'real' cash put aside for regular expenses. In a nutshell, by keeping as much money as we can, for the longest time possible, in our transaction account - which is linked to our homeloan - we pay less interest on our home loan. So most major expenses (groceries, bills and so on) are put onto our credit card and then we pay that off in full at the end of the month. It does make for some interesting looks at the supermarket sometimes though. The best looks are the ones when I pay for just $10 or $15 worth of groceries by whipping out the Visa, LOL (we could use our debit card - same card actually, but with both accounts linked to it - but that takes money out of our account immediately, which negates the whole 'leaving money in account as long as possible' thing). But there really does still tend to be a bit of a stigma associated with putting groceries on credit. I wish I could explain to the people behind me in line our whole ethos on budgeting, but alas, I can't :P
One of the biggest problems with a virtual budget like this is that it is very, very easy to overspend. It's not a debt-creating problem, even though we do put most purchases on the credit card, because no matter what the balance, we pay it off in full each month. But over the last few months we've seen our average monthly credit card bill rise (and seeing a whole month's worth of expenses on your card is scary enough!) and, once paid off, our regular transaction account drop. Everything's going in the wrong direction!
So, we're back to Baggie Budgeting.
Some might argue that the same system could be set up in a virtual way - still putting bills on the card but then deducting the amounts from a spreadsheet in order to stick to budget. In my experience this can work, but it takes a lot more discipline than a hands-on approach. With physical money to sort and 'pay' to each baggie, there's a concrete example right in front of your face. In order to purchase this house (we moved in 2 ½ years ago) we went through an intensive saving period, and managed to put away $14k in around 14 months, on an income probably only two-thirds of what it is now. The reason we succeeded then is, in part, due to Baggie Budgeting. And, you know, the promise of our very own home, LOL.
I wrote an article on Baggie Budgeting which appeared on The Dollar Stretcher website during the midst of this 14 month savings period. I've been meaning to edit it to put up here for a while now, so keep an eye out for that. But the basic premise is no-brainer simple. Label some baggies. Put money in baggies. Take out only the money in the baggies. And begin again next pay day. And though most parts of my budget will remain credit-based by necessity (it really does make a big difference to how much interest we pay on our home loan), I thought I'd go 'back to basics' for my housekeeping money.
More to come soon...
Cheers,
Lizzie
One of the biggest problems with a virtual budget like this is that it is very, very easy to overspend. It's not a debt-creating problem, even though we do put most purchases on the credit card, because no matter what the balance, we pay it off in full each month. But over the last few months we've seen our average monthly credit card bill rise (and seeing a whole month's worth of expenses on your card is scary enough!) and, once paid off, our regular transaction account drop. Everything's going in the wrong direction!
So, we're back to Baggie Budgeting.
Some might argue that the same system could be set up in a virtual way - still putting bills on the card but then deducting the amounts from a spreadsheet in order to stick to budget. In my experience this can work, but it takes a lot more discipline than a hands-on approach. With physical money to sort and 'pay' to each baggie, there's a concrete example right in front of your face. In order to purchase this house (we moved in 2 ½ years ago) we went through an intensive saving period, and managed to put away $14k in around 14 months, on an income probably only two-thirds of what it is now. The reason we succeeded then is, in part, due to Baggie Budgeting. And, you know, the promise of our very own home, LOL.
I wrote an article on Baggie Budgeting which appeared on The Dollar Stretcher website during the midst of this 14 month savings period. I've been meaning to edit it to put up here for a while now, so keep an eye out for that. But the basic premise is no-brainer simple. Label some baggies. Put money in baggies. Take out only the money in the baggies. And begin again next pay day. And though most parts of my budget will remain credit-based by necessity (it really does make a big difference to how much interest we pay on our home loan), I thought I'd go 'back to basics' for my housekeeping money.
More to come soon...
Cheers,
Lizzie
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