Have you ever felt a panicky feeling when an unexpected expense hit you that you weren’t prepared to cover? Do you find yourself struggling to make ends meet at the end of the month? Does it seem like you always have to “go without” because you don’t have enough money to enjoy that something special now and then?

I know what it is like to run on the financial treadmill and feel like you aren’t getting anywhere. After many years of trial and error; working in the financial services industry; reading many books and articles; giving seminars; and talking with people who seemed to have a handle on their financial picture in life, I have finally found a solution that has eliminated much of the financial stress and worry too common to many people. The following simple strategy can make it possible to enjoy financial peace of mind even though you may not be financially independent – one does not need to have an abundance of money in order to enjoy some of life’s pleasures and be free of the worry and frustration of being financially strapped. This strategy has served me well for many years. This is a powerful budgeting plan that can really work and help keep you financially organized and responsible.

Overview of The Plan

The old saying, “many hands make light work” still holds true today. The idea is to make your money work for you as well as your credit card and bank. Although a step-by-step detail will follow, the overall concept is that you will use your credit card to make as many purchases as possible so as to maximize the benefit rewards offered by the credit card. For example, I have successfully used MasterCard with a gasoline rebate; a VISA card with a 2% cash-back rewards program; another VISA card with merchandise rewards from LL Bean; and an American Express card with rewards of Delta Skymiles.

Each time you make a purchase you will deduct the amount of the purchase from a checkbook register, as if you had paid for the purchase with a check. When you receive the credit card statement you will simply write one check to the credit card company to cover all of the purchases, instead of writing numerous checks to several different vendors throughout the month. Since you have already deducted the amount of each purchase on a register, but have not actually paid for the purchases yet (the credit card has been carrying the purchases for the month) the money to cover the payment is still sitting in your checking account. This is a form of floating, and to take advantage of this opportunity you should establish an interest-bearing checking account, preferable one with no fee involved. Each month your actual checking account balance at the bank will show a large positive balance. The reason why is because you have not paid for the purchases yet, but have put them on the credit card. During this time your interest-bearing account will pay you interest on the money that is still sitting in there. 

Preparing to Make The Plan Work

The next few steps will help you create categories and prepare registers to best manage your money. You will first establish “categories.” Categories are what you will divide your paycheck into (i.e. bills, groceries, entertainment, etc…). Each category has a separate register wholly dedicated for that category; when you get your paycheck, instead of putting the whole amount into one checkbook register, you will put designated parts of it into several different registers and run them as separate accounts. For example, you may decide to have a register for bills, another for groceries, and another for entertainment. As you are paid with each paycheck, simply put the allotted amount into each register.

 Remember: Categories are definitions of what you decide to organize your paycheck into (click the hyperlink for a printable copy of a 26-week paycheck register with the categories listed which I personally use). It can be edited and modified to meet your own needs. Registers are where you record your purchases and deposit activity for each of the categories (click the hyperlinks for printable copies of the following registers: Charity; Bills; Medical; Car; Home; Grocery; Family; Entertainment; and Christmas).

Over time, some registers may begin to show a substantial surplus. DO NOT fall for the mistake of thinking this is extra money – it is not; you just haven’t used it yet. For example, let’s say that you have a register for car/automotive expenses, and you haven’t purchased anything for your vehicle in a long time, by now the register is showing, perhaps, several hundred dollars. The next time you blow a tire, or need a new alternator you won’t have to even give it a second thought – it is already budgeted for and the money is sitting in the register designed for that purpose and ready to use. The groceries, the family vacation, the date night are never compromised. You have the problem covered. You have peace of mind.

How to Record: 6 Simple Steps to Make this Work

Break down your paycheck into several manageable categories. It doesn’t matter how many categories you have as long as the sum of what goes into all of them equals the total amount of your paycheck.

Step 1: Determine what categories best fit your needs, and then determine what portion of your paycheck you are going to allocate into each category. Enter these categories on a paycheck register. See figure 1.

Each time you receive a paycheck, record your allocations for each category on the paycheck register (figure 2). This example shows recording a paycheck for pay period #4. Again, this sheet simply shows me at a glace into what account the money from the paycheck has gone.

Step 2: For each category use a separate register that is wholly dedicated to that category and record the allotted deposit onto that register each time you receive a paycheck. In this example we are using a register for “Family” expenses, the highlighted area shows the deposit from paycheck #4 being entered on June 11th (figure 3).

Step 3: Each time you make a purchase using your credit card, record the purchase in the appropriate register that applies to that purchase. Place a small “v.” (for VISA) or some other symbol at the beginning of the description so you will know that this entry was a credit card purchase; and subtract the cost from the balance as if you made the purchase using a check. Later, you will record the check number used to pay the credit card for this purchase, for now leave it blank. For example, see the highlighted area for a purchase at Wal-Mart (figure 4).

Step 4: When you receive your credit card statement it will show several purchases made throughout the month (figure 5). Simply write one check, made out to the credit card company, to pay for all of the purchases. By paying the bill in full you will not carry a balance since you still have the funds in your bank account; all you have done is simply subtracted the total in the register at the time of purchase.

Now, go through each register and find the corresponding entry with the itemized purchase on the credit card statement. Place a small check mark next to each item on the statement after you find it recorded in the register (figure 6).

Also, place a check mark in the register next to that recorded item to indicate that you found and identified the purchase on the credit card statement (figure 7).

Step 5: Since you only wrote one check, made out to the credit card company to pay for all of the purchases shown on the statement, record the check number of that one check next to each of the items recorded in the checkbook register, which appeared on the credit card statement (figure 8).