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Cash Envelopes

For many, a cash-only system is a smart solution to prevent overspending. In this system, envelopes are labeled with the various monthly expense categories and stuffed with a budgeted amount of cash. As bills become due or expenses occur, the appropriate amount of cash is withdrawn from the envelopes to cover the costs and replaced by expense receipts. Once the envelope is empty, you know if you hit your spending limit for that budget area.

Electronic Budget Tracking

Consumers can find everything they need online to begin tracking their expenses electronically. A basic electronic budget worksheet is available for free at Kiplinger.com, or you can purchase a software program for approximately $60 to help you manage your money. Quicken is very popular, as it automatically downloads and categorizes your income and expenses. Just be mindful of using online sites to manage your money, as they require all your financial information, which can be a security risk.

As you track your spending, your goal should be to achieve a disposable net income—an amount of money that you are left with after you pay your total monthly expenses. Small adjustments to your spending plan can improve your disposable net income.

Don't forget to include annual discretionary expenses. Birthday gifts, holiday spending, sports/extracurricular activities and automobile maintenance costs pop up regularly, so make sure to include these in your budget.

Clarky Davis is the author of the Debt Diva Blog and the Debt Diva's 2008 Financial Guide. She offers budgeting and money management advice based on her own experiences and more than five years working in the debt management industry. She is a spokeswoman for CareOne Services, helping consumers gain control over their debt.

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