Minimalism and the dual account budget

I’ve written before that I’m going to be conducting a ‘Life Energy Experiment’ in November. For everything I buy, I’m going to ask if the value and fulfillment derived from that purchase are worth the ‘life energy’ (time, work effort) spent. Say I earned £10 per hour, it would take a whole hour of my ‘life energy’ to earn the money to pay for a £10 item. That’s going to make me think a whole lot more about what I buy. Follow my experiment using the hashtag #LifeEnergyExperiment and feel free to join in!

Different approaches to money management

I have been thinking (and reading) about money for a few months now. There are some great ideas and minimalist approaches to managing money that are well worth a read. Check out caitflanders.com, daveramsey.com and posts such as this from The Minimalists.

Set up two accounts

One thing that definitely works for me is something I haven’t seen anyone write about in the books or blog posts I’ve read. You may have come across it or even tried it yourself.

Instead of trying to manage all of your bills and monthly outgoings from a single account, set up two accounts. The first account is the one we use to pay our regular bills (via direct debit and standing orders). We never have to worry about remembering to make these payments, as they happen automatically. Each payday, we transfer the required amount of money into that account and let the technology do the work. We monitor the account, but we don’t have to watch our spending, as we anticipate the bills that are to come and make sure there’s enough money in there to cover them (plus a bit more).

The second account is where the money we’ll need throughout the month sits. This money is for our actual spending e.g. our weekly shopping, groceries, fuel etc. For this account, I establish a flexible, monthly budget in anticipation of the expenditure we’ll have during that period.

Concern yourself with your discretionary spends

Because the household bills are dealt with in the first account, we only have to concern ourselves with the spending we control during the month. That makes budgeting and tracking our spending so much more straightforward and simple. The amounts and categories are up to you, but the principle is always the same.
Throughout the month, we keep a track of what’s in the account and what’s due to go out.
That way, we always know what we *really* have left! We also track expenditure against our pre-established budget.

Keep on top of your finances

Managing our finances this way really helps to track our spending during the month and ensures we keep on top of our finances, rather than our finances getting on top of us.

Ask me for a copy of the dual account budget spreadsheet

If you’d like a working copy of the spreadsheet we use, just drop me a line via my contact form and I’ll send it to you. You can paste your own amounts into the relevant cells and set up your budget for the month. Add in new columns to expand your categories, but make sure the totals all add up. There are lots of ways to manage your finances and some great apps, if you prefer to work that way. If you’re new to budgeting, however, maybe this ‘dual account’ approach will be of use.

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