Throw your Checkbook Away!

by Debbie Vasen | More from this Blogger

06 Aug 2007 09:10 AM

What did you say... throw your checkbook away? Now, that certainly sounds like a crazy idea coming from a money blogger. Shouldn't you be on top of your bank accounts? How can you do that without a checkbook?

The problem with a checkbook is that it is deceiving. If it is accurately kept, it only shows you the money you have at one point in time. It doesn't explain that there are still 5 more bills to pay this month, or your paycheck next month will include your bonus. This snapshot can actually be misleading and provide you with an unrealistic view of your financial condition.

The better tool is a budgeting notebook. This notebook should be dividing into categories, with an account balance for each one. It is almost like a miniature checkbook for each of your separate budget categories. This will help you see a much clearer picture of where you actually are financially.

Let me help with this picture by providing an example. Some bills like insurance are paid yearly, instead of monthly. But, most budgets are kept on a monthly basis. So, if you have a category for insurance, you will need to set a small amount "aside" each month to pay for that insurance bill when it comes. By creating a "checkbook" style account for the insurance category, you can ensure you stay on track and actually have that money in your account when the insurance bill arrives.

This process can also be an excellent way to save for a future purchase. Simply create a category for the item in your budget, setting aside the money in your notebook account. Then, if you ignore your actual bank balances, you may reach your goal!

You can use this concept with many budgeting software programs and some will also allow you to connect directly to your bank accounts. Or, do it the old fashioned way with a simple binder and some notebook paper. It doesn't actually matter what method you choose, what matters is that it works for you.

Related Articles:

*Do you Need a Budget if you're not Strapped for Cash?

*Budgets and Diets

*The Dirty Word - Budget

Learn more about Debbie Vasen

Debbie Vasen is a published web content editor and writer, as well as a freelance writer for various print publications. In addition to blogging at Families.

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