It is really easy to lose track of your spending when you do it digitally. A simple but very effective solution is to budget your cash using the money jars strategy.
The idea behind money jars is that you can't spend money that you don't have and being able to visually see what you have left makes it obvious. It's a guaranteed way to avoid overspending on your budget as long as you stick to the rules.
What are Money Jars?
The concept of using money jars for budgeting is quite simple. You have a jar for each main type of expense, and then fill the jars with your income. It's a visual budgeting tool that is guaranteed to work as long as you don't cheat.
I'm a big fan of this strategy because it reminds me of growing up. We had credit cards and checks, but money moved really slow, so a lot of people just stuck with cash. Before I had my first credit card, I lived almost entirely based on cash. It was actually the easiest way to budget money because you know exactly what you're spending and what you have left.
The money jar budgeting system takes it to the next level by visually showing you how much you have left for each type of expense. For example, you'll have a jar for entertainment. When you spend everything from that jar in a month, you don't get to spend anything else to have fun until the jar gets replenished. If you use credit or debit cards, it's really easy to lose track of how much you have spent, so you're much more likely to overspend and blow your budget that way.
Plan Your Budget
Before you can actually try out this system for yourself, you're going to need to plan a monthly spending budget. First start with your income, so you know how much money you bring home to work with on each budget. Next list all of your set expenses each month. This will include things like a rent / mortgage payment, car payment, utilities, cell phone, streaming services, and debt payments.
You'll have other necessary expenses each month beyond your basic bills. Food, gas, and various types of maintenance are common, but you could have others. You can even add optional expenses into the budget, such as money to spend on entertainment to have fun.
Once you know how much cash you have left over each month, make sure you set budgets for yourself to save money for an emergency fund, retirement accounts, and possibly a dream vacation. These long-term financial goals require planning in your monthly budget to actually succeed.
Cash Your Paycheck
With your final monthly budget list, label a jar for each main category of spending and expenses. You may not need a jar for a few categories though, such as retirement savings. These will likely end up being contributed to an online brokerage account, so it's okay if these funds never end up in a money jar.
After you have all of your budgeting jars made and get your next paycheck, have all of it cashed except for savings that will get put into a digital account. All you need to do now is divide up the cash among all of the jars. This should be done according to your monthly budget plan and adjusted for your paycheck frequency.
As an example, let's say your mortgage payment is $2,000 per month. You get paid weekly and take home $1,600 weekly. If you were only paid once a month, you could just divide it according to the numbers on your budget, but more frequent pay periods will need to be divided appropriately. For weekly pay in this example, I could contribute 25% of the amount on my budget from each check, so I'd put $500 from my check into the mortgage jar. This accounts for 48 of my 52 annual checks, so the other 4 would be bonus money that isn't part of the budget plan.
After four weekly paychecks, I would have contributed the full amounts on my budget to each of the appropriate jars. There would now be $2,000 in the mortgage jar, ready to make the house payment for the month. With this approach, it can take a full month before your money jars truly balance out like they should, but it's much easier to keep up with it after that initial month.
Stick to the Money Jar Plan
The #1 key concept for the money jar budgeting strategy is to stick to the plan. If you spend all of your entertainment money for the month, you can't take $20 out of the rent jar or else you're going to mess up your budget and come up short on an important bill.
Once you put your hard-earned cash into a container, it doesn't come out unless it will be used for the exact purpose that you have planned. Straying outside of your budget will make the entire system fall apart, so this is the most important rule you need to remember and don't violate it.
If you do find yourself forced into situations where you have to use money from the wrong jar, then you have a problem with your budget. Take a look back at your planning and try to make some adjustments to ensure you can properly pay your bills. If you simply aren't making enough money, consider starting a side hustle to earn a supplemental income to boost your revenue.
Even the best budgets can run into minor problems and shortfalls. It could be something simple like budgeting $200 for power each month and receiving a $220 bill on a really cold month in the winter. However, it's possible for more major issues to happen, such as losing your job and having your income source cut off involuntarily.
The solution to potential budget problems with the money jar system is to simply have emergency savings. When possible, try to save up at least six months worth of expenses, although it can be useful to have a year or even more. This gives you a way to support yourself if you end up unemployed for a year during a recession.
For minor budget shortfalls, like the $20 shortfall on the hypothetical power bill I talked about, simply pull money from your emergency fund to pay it. This emergency fund should receive a regular monthly contribution as part of your budget, which is how you build the fund. This gives you the flexibility to handle a wide variety of issues that would normally destroy a monthly budget. With the budgeting money jars combined with an emergency fund, you can take control of your financial future with ease.