Clark Howard

How to control your spending | Try managing your money the old-fashioned way

Taking control of your money

The concept of money — and everything that goes along with it — can definitely be confusing, intimidating and certainly overwhelming.

But I want to make something very clear: You do not have to be an expert to be good with money.

Regardless of how much you have or how much you know, successful money management comes down to one simple thing: discipline.

Actually, anyone can be good with money — you just have to start paying attention and find a method that works for you.

RELATED: 6 easy money tips for people who are forgetful or unorganized

Why you need a budget

How often do you reach the end of the month and realize you spent the money you had planned to save? How often do you reach the end of the month and have no idea how much you spent?
If this sounds familiar, you aren’t alone. People ignore what’s going on with their money for a variety of reasons — whether they don’t want to face it, don’t think they make enough for it to matter or think they can always deal with it later — whatever the reason, it’s just an excuse. And it’s holding you back more than you realize.
Contrary to popular belief, budgeting isn’t actually about restricting yourself and never having fun — it’s about understanding your money, so you can make smarter choices in life. Simply think of your budget as a tool — a tool that allows you to stretch your paycheck as far as possible.
Having a plan is the only way to take, and maintain, control of your life, because being in control of your money is the only way to be in control of your own choices.
And that plan needs to give every dollar a purpose — because without any idea of how much you’re spending and what you’re spending on, you end up wasting a lot of money that could be piling up in savings.
Bottom line: Nothing is going to change until you decide to start paying attention to your money — how much is coming in and how much is going out. Because if you don’t, you will very easily reach a point when your indifference prevents you from doing the things you want to do when you want to do them — and that’s not a pleasant situation to be in.

So if you’re struggling to get a handle on your spending and saving, there’s one simple solution that can boost your money management skills pretty quickly — and it’s called the envelope method.

RELATED: How to change the way you think about budgeting

Envelope Method: How cash can control your spending

If you have a hard time managing your money and actually sticking to your budget, using the “envelope system” may be a great solution for you.

The thing about cash that makes people change their habits is the tangible effect — actually feeling your wallet (or envelope) getting thinner.

Basically, you’re going to a cash-only budget in order to get a better understanding of not only where your money is going, but also how much you’re wasting each month.

How the envelope method works

  1. First, make sure to keep enough cash in your checking account to cover any recurring bills or other monthly payments you pay by check or online.
  2. Next, figure out how much you should be spending each month on every other category of your budget.
  3. Once you have enough money in your checking to cover recurring bills, then go ahead and split up the rest of your paycheck/money/budget into separate envelopes of cash.
  4. Each envelope represents one area of spending — so if you've budgeted $500 for groceries each month, then put $500 cash into an envelope labeled "groceries."
  5. Then do this for all of your other monthly expenses (eating out, shopping, entertainment etc.).
  6. Use the envelopes to keep track of exactly how much you've spent and how much you have left for the rest of the month for each part of the budget.

After implementing this strategy, you’ll quickly find yourself rethinking a lot more purchases — as handing over a $20 bill (when the envelope is getting thinner) will be a lot more difficult than just swiping a card.

Instead of using envelopes, you can also set up your direct deposit so that certain amounts of your paycheck are sent to different accounts. For example, you could have three or four checking accounts and one savings account — and then have your paychecks automatically split the money among these separate accounts each month.

Tracking your spending

In order to eliminate wasteful spending, you have to track every expense and purchase, whether it’s using cash or an app that does it for you. Swiping a debit or credit card will no doubt cause you to spend more than you should, so tracking where every dollar is going will help you develop better habits and save more over time.