How to Make Your Financial Life More Manageable

We have no doubt about it: Money management can be complicated. Another thing we know for sure:  If you have a financial partner, your money decisions are twice as complicated. It is time to make it simple again. Sit down for a serious discussion with your financial partner—your spouse, your parents, your roommate. Decide which of you balances the checkbook better. Decide which of you shops for groceries better. Decide which of you files the taxes better. Then make a plan and try it out for a few months.

Here are some more ways to simplify your life and your money:

1. Get on a cash-and-carry basis with the envelope system.

                Here's how to do it: First, list all the things you can use cash to purchase, such as groceries, haircuts, lunches, gas for your car, clothes, entertainment, etc.

                Second, put the amount of cash you have allocated for each month in each category in its own separate envelope. Be sure to include a small weekly allowance for "walking-around" fun money or spending money. You need some spare money for the occasional treats such as beverages and grooming items. However, once that weekly allowance is spent, you must wait until next week to treat yourself again.

2. Resolve to quit using debit cards and checks.
3. Resolve to quit using credit cards. You and your financial partner need to promise each other that you will not use credit cards anymore. The only conditions in which you would use the credit card are (1) if it is a planned purchase that you both agree on together, or (2) if you were 100% committed to paying off the entire balance that month.
4. Put away your plastic. If you keep extra credit cards handy, you may start to use them. Credit is very, very expensive money. Use it only in an emergency. If you cannot pay the card off at the end of the month, you cannot afford the purchase. Try to remind yourself, "It's not money; its plastic—and its toxic debt!"
5. Resolve to get “unhooked” from your credit cards. Credit card addiction can sneak up on you. Before you know it, you may start "tossing down your plastic" several times a day. It is not until you get your monthly credit card statement that you finally realize what you are doing to yourself.
6. Control your saving. Formulate a realistic plan to save, even if it is just a few dollars a month. Starting out small is okay. The goal is to develop the habit of saving. Gradually increase the amount you save. Most people should be saving at least 10% of each paycheck for an "emergency" fund. The larger the savings, the larger the results. Strategic, disciplined savings can have enormous, long-term benefits.

When you start to stockpile your savings account, use cash, and stop using your credit cards, your friends will be curious how you did it. They will wonder how can became so disciplined and prepared. Share your secrets with them. Let them know that you are proud to be living within your budget and they can do it, too.

Heidi Clingen is a long-time resident of Stevenson Ranch. She and Samuel K. Freshman are authors of The Smartest Way™ to Save, Why You Can’t Hang on to Money and What to Do About It. They offer only their opinion, which does not constitute professional, financial, or legal advice. To receive a copy of The Principles of Financial Independence or submit questions, email them at Heidi@TheSmartestWay.com.