I'm all for segregation!

Hey, this is an idea that has most definitely saved me the most money over the years. Any financial counselor will tell you that budgeting is all about tracking your expenses. Most college-age people I know don't even watch their money. Mostly because nobody cares to keep track of receipts (except for me... okay, so I'm a little O.C.D.). Well I've been putting this idea into practice for many years now and it's saved much frustration and helped me to watch where my money's going. (Back before I did this, there was many a time that I had said, "I just don't know where my paycheck has gone this week." Ever said that? That's a problem!)

I actually separate my bills and purchases into three different payment types: check, credit card,and cash/debit. Most people I know have debit (which I abhor) or just carry around cash all the time (too easy to get stolen and too available for compulsory spending). I have a checking account (which I never use debit on... debit works too much like expendable cash). Every cent I get goes into it. Paychecks, money from eBay, any time I get money I put it into checking, even if I know I'm gonna get cash out later anyways. This way I know what I can budget and I won't be so eager to spend free-floating cash.

I separate these into three areas because that way I know what I have to track and keep a close eye on and what I am able to budget. With checks, I will only pay regular bills, things that are expected every month and vary little. With credit cards I will by my big-ticket items with a variable budget. With cash I will get small-ticket items with a strict budget.

Checks are great to track finances because you get a monthly statement mailed to you, and, if you use the ledger (I highly recommend you do that, along with using carbons with your checks) you always know your bank account balance. To simplify things, I only use checks for monthly bills: cellphone, cable/internet, insurance, donations/giving, etc. These things do not normally change - they are expected and unavoidable (for the most part). A good idea (what I do) is to keep a spreadsheet of these expected bills and deduct them from your paycheck before spending on anything else. *Side Note: I usually buy gas with a credit card, even though it seems like a regular expense. Travel is a budgetable area so I put it on plastic.*

Now most of the time you hear that credit should be avoided at all costs. Ehh... yeah, most of the time that's probably the best idea to stay away from credit cards until you learn how to use them. Proper use of credit means: 1) Pay them off completely as soon as they come due. 2) Never buy anything with credit that you don't already have money in checking to cover. 3) Don't be so eager to use it on small-ticket items - that's what cash is for. I made a personal rule to never buy anything on credit card under $25.. anything over $25, you have to make conscious decisions on whether or not it's necessity - things like gas, groceries, school books, etc. 4) Track EVERYTHING you use a credit card on. For one thing, it's the safest thing to do to make sure nobody is using your credit card information, and also this is your greatest area to make decisions about budgeting. I'll talk more about that in a bit.

Cash is key. Just like a prepaid cellphone or cash card, it has a built-in turn-off feature. You can't spend more than you have, and shelling out the Washingtons one by one makes you do it a lot slower :). Make an effort to get cash out once a week (or every two weeks if you're good at budgeting), and don't get out any more; when you run out, you go without *I didn't mean for that to rhyme*. Back when I was working I would get out $100 every week. Now that I'm living on school loans that's gone down to $25 a week. (That's much easier for me to handle since I don't get fast food.) Cash is for the little purchases, like those late night trips to get toilet paper for the dorm. I never keep receipts for purchases made with cash because they're small (and usually frequent) and I've already budgeted myself for the week. If you end up with extra money at the end of the week, you could maybe give yourself less cash allowance next week and put the extra towards bills.

Now about budgeting the credit card... I try to keep plastic usage to a minimum and just use it when I'm buying a week's bill of groceries or apartment supplies, gas and other travel expenses, and anything else that's adjustable from week to week (month to month). What I do is spreadsheet my one credit card (you usually don't need more than one, so don't get more just to have more credit) and catagorize things like travel, groceries, books and cd's, and other variable catagories. At the end of the month I am able to see how much more I've spent than the previous month and I can see clearly which areas I can be more frugal in.

By keeping some kind of bank account, running all of your money through that and segregating your payment options, then budgeting becomes much more manageable. I guarantee you'll be able to retain much more of your paycheck this way, or at least become more educated about where you're over-spending.