Would Like a Copy of Your Receipt?

How the Magical Money Monster Saved Our Budget

Sorry I haven't posted in a while! This can be blamed on: 1) too much working/traveling/visitors, 2) some of the keys on my laptop keyboard have mysteriously become uncooperative—namely letters x, c, v, m, and q (it’s hard to talk about cash flow without the letter c--but never fear! a frugal solution was found in an unused USB keyboard!), and 3) I am pretty sure I only have about 5 readers at this point—so to you, faithful reader, I will continue to bestow my (non)wisdom!

Do you keep your receipts? I never did. Whenever I was asked if I wanted a copy of my receipt, I thought of the paper wasted and always declined. When my statements came through I figured I always remember what I spent. Those that were forced upon me became crumpled bits of paper in the bottom of my purse for scribbling notes or wrapping up gum that had outlived its usefulness (random fact: the average lifespan of gum in my mouth is about 10 minutes). But now receipts have their own special place that borders on reverence—the Magical Money Monster wallet:

Say what? Don’t worry, we’ll get there.

So, today we are going to talk about the “B” word, which some people think is a dirty word. Not me. I love budgets. Budgets are beautiful. Streamlined. Organized. Granted, I am not your average person. But budgets make me feel like I have some semblance of control over my money. I won’t go over the specifics of budgeting in detail, but it is basically a plan for your money. You figure out what you earn on a monthly basis, figure out what your monthly expenses are, and then decide where the money should go. There are many ways to do this. I like to use Excel because at some point in my life I figured out how to use the E3:E7 – B2:B5 technology, and this is the only real world application I can find for it.  Or you can just write it all down on a piece of paper.

You of course have the necessary categories, like housing and utilities and car payments and such. We list our savings category first so we take it seriously. Then we have other categories like fun money and vet bills and car maintenance. And then we spend money according to our budget and it all works out perfectly, right?

Ha ha. As if! (Did you hear Alicia Silverstone there?)

The budget is just the plan. I am great at planning. The cash flow is the execution (if you are like me and hardly ever use cash, consider it the digitized monetary flow)—where is the money actually going? This part I am not so good at. We have a beautiful budget that I like to gaze at longingly when I am feeling pretty idealistic. But cash flow—cash flow represents reality. Nothing busts a budget faster than cash flow. And our cash flow has been a catastrophic train wreck.

With our perfect budget we figured out that we would have about $250 left over every month. We called this “ancillary money” and used it to cover those unexpected expenses that life throws at you. You know, like buying trash bags. And that random screw you needed to fix the door. A trip to urgent care. Eating out when we felt like it. Those cute socks at Target. Ancillary became a catch all. And it started costing way more than $250. But we didn’t know this because we had no concept of cash flow.

We would simply get the credit card statement every month and my stomach would fall to my ankles a little. Then mild panic would set in. I started going through the transactions thinking “this can’t be right!” But it was. After the spending amnesia that occurs as you are actively spending money, I remembered every last transaction. We were still paying off our credit card every month, but sometimes it meant dipping into our savings to cover it. You know, using our savings to pay for things like ice cream. Ouch.

Then we’d “buckle down” for a while and eat canned beans and never hang out with our friends and get a little bit of control back. This would last for about 2 weeks before we really started hating life. Then, since things were back in “control”, we’d ease back into our old ways and start the cycle all over again. A retroactive cash flow study (i.e. where did the money go?) helped us see that our spending was sometimes out of control. But it didn’t do much to change our behavior in a way that was helpful or sustainable.

We needed to know where our money was going. Here. Now. In the present. So here is the secret to cash flow. Are you ready for it? It has taken financial gurus centuries to come up with this little nugget, so you may want to sit down:

Write down or otherwise record every penny you spend. Every. Last. Cent.

That’s it. It’s easy but tedious. Hard but not complicated. But it serves two purposes: 1) you actually know what your money is doing in real time, and 2) it makes you think about what you are buying as you are buying it (no more spending amnesia). 

In short, it’s like lifting the fog off of your bank account. Before you could kind of see what was happening, but without clear vision it was pretty easy to miss that curve and go careening off of the road. When you get rid of the fog, you may still go flying off of the curve, but at least you can brace yourself for the impact. We are still hitting several trees (sorry, trees!), but it’s doing a lot less damage.

Now, you can carry a handy notebook and record things with the tried and true paper method. You can use a fancy app and enter transactions in real time. There is probably some magic where you can scan your receipts and your smartphone will do it for you.  I personally made myself a very sophisticated Magical Money Monster wallet with some duct tape and cardboard (see above—I know, I’m weird) that eats my receipts until I get home and faithfully enter them into my YNAB software (www.youneedabudget.com –if you haven’t checked this out, you should—it’s beautiful). But it is vital to know where your money is going before you can tell it how to work for you.

Some people will say that all of this is too much work. I guess it can be, especially in the beginning. But in actuality it only takes me about 30 minutes a week. And it is a heck of a lot less work than the damage control money-shuffling that happens when I overspend. All because I wanted some ice cream.

Now every receipt I collect makes things a little less foggy, which makes everything a little bit clearer. Plus the Magical Money Monster gets fed (nobody likes a hangry monster). Like us, you will probably still go off the road when life throws you a curve. But you’ll go off a little bit slower. A little bit more prepared. That’s okay. Be nice to yourself. Just by being honest with your spending you are making great progress.  Soon your idealism and your reality will be (mostly) the same. You’ll be able to smooth through those curves without all of the drama. So make yourself a special monster wallet. Or download a fancy app. Or just use a scraggly piece of paper. Be nice. But be honest. Your budget will thank you.