As I mentioned in yesterday’s post, my spending got slightly over my normal pattern and the loose budgeting system I have needs to be readjusted. In these times, there are a few budgetary and cash flow measures I tend to do in order to control my personal finances. To give you some indication of what is happening (and why these measures are a little more important than usual), my quarterly personal tax installment is due on or before September 15 and I tend to pay this on or about September 1 so the tax-man is getting its share of cash in the bank.

Accordingly, these are the steps I immediate take when my spending gets a little out of control:

1. Pay for everything by debit card/pre-pay the credit card: Some personal finance books suggest that you throw away your credit card in order to control spending. I tend to disagree unless you have some serious shopping issues and cannot control yourself. Destroying a credit card is a short term solution but canceling the account may actually damage your credit score if the credit history on that card has been relatively good (see my previous post on this topic). If the payment history on that card is terrible than the long term effect may not be that important. What I do instead is move to paying for everything by debit card- which is the same as paying for things in cash. Because I do not believe in walking around with a lot of cash, if I have to buy anything more than $200, I will charge this on my credit card and pre-pay this item as soon it is posted on my credit card (weekend transactions are usually posted on the next business day so I call two business days after the transaction to see if it has gone through). I end up with points on the credit card but know that the item has been paid off within a week.
2. Make an immediate contribution to my emergency funds: I handicap my cash in the bank by moving money to my emergency fund (a part of which also doubles as an acquisition fund if stocks get really cheap). Given the steps in #1, I immediately have less cash to spend, reducing spending, and I also have the comfort in knowing I have some more funds set aside; adding to emergency funds tends to put me in a psychological comfort zone as well.
3. Increase my grocery spending: This seems counter-intuitive but the easiest way to save money is to eat at home or brown-bag it more often. Thus, my grocery bill goes up as I buy more food to force myself to eat at home, reducing the money I spend at restaurants.
4. Empty my change jar: It was once observed that women carry change more often than men. Women have purses to carry change; men already have enough trouble keeping their pants up without putting change in their pocket. I fall into this observation and I have literally jars of change in my house. Last time I counted out my change, I “made” $100 which allowed me to replace my old towels. You have enough jars and you could pay for a grocery bill some time (just please do not count it out in front of me at the cashier’s).
5. Spend more time with family: Instant free entertainment, the wisdom of elders, an occasional free meal and leftovers to take home. Not a bad time all around.