Giving Your Money Jobs

If money is not handled intentionally, it generally finds things to buy. Giving money jobs to do is a form of organizing personal habits and handling money with a purpose. Let’s say you are in the store and see something you would really like to have. In your wallet is enough money to buy the item, so you buy it. Later that day, your car needs gas, but your wallet is almost empty. Now what?

Without a specific job to do, your money finds ways to disappear. How can we assign tasks for money?

Set Goals

One of the easiest methods of assigning tasks to money is to set goals for ourselves. Goals can be short-term or long-term, and should be a mix of both. A goal is a specific result we would like to accomplish. Saving for a new tablet is a goal. When enough money is saved, you can purchase the tablet, and the goal is achieved. Graduating from college without any student loan debt is a goal. This goal may be achieved in several different methods. The point is that goals help us focus effort and make decisions around accomplishing a result.

As part of this lesson, it would be a good idea to form several goals, so that you can begin training your habits around achieving goals. It is always a good idea to include short-term goals, and the goal should always be achievable. Major problems arise when goals are not achievable given a lack of resources, lack of time or lack of opportunity. Major problems also arise when goals are too far into the future. There is a phenomenon recently identified as “frugal fatigue,” which is an expression for a person who is constantly living very frugally but not really accomplishing anything. The result is burn-out and, very often, fatalism – the idea that it is easier to give up than to adjust strategies.

Goals can be very useful in avoiding high amounts of debt if you plan ahead for purchases. For example, you may set a goal to purchase a vehicle in cash, without borrowing any money, in 12 months for $2,500. The goal is defined, with enough effort it is achievable, and disciplining yourself to stay with the goal avoids borrowing.

Limit Spending

A concept our great-grandmothers used (which is to say that this idea is not unique to any one person) is micro-budgeting. One method to micro-budget is splitting money into categories and assigning amounts to each category. You can use envelopes to keep money separated by category. When the money is spent for that week or that month, you stop spending. This is a very effective approach to giving your money jobs for several reasons.

  • It forces you to train (or re-train) habits and teaches discipline. These two things are psychological and are very important to develop a healthy approach toward money.
  • It avoids frugal fatigue. A problem with frugal fatigue is that it comes from a feeling of not being able to spend money or enjoy money. You can keep one envelope as “whatever” money or for specific things that bring you joy.
  • You can use envelopes to reach savings goals or to store money for expenses that will arise but may take more than one month’s worth of money. An example of this type of expense is a vehicle repair, such as tires or a new alternator. Money leftover each month can be carried to the next month.

This method is best used with paper currency (cash) because there is psychological pain associated with spending cash that does not exist with credit or debit cards. However, an alternative is to use separate bank accounts. Although it might drive your local banker nuts, using separate accounts keeps money earmarked for spending out of your main checking account where you keep funds for other bills that have to be paid. Something to consider with cash is that you can quickly see how much money you have left. This is why the term micro-budgeting is appropriate. Let’s say you allocate $150 to groceries for the month. As the month goes by, you can easily look in the grocery envelope to see how much is left and plan out your expenses to make the money last.

It is a bit harder to do this if you instead use a bank account, unless you use other tools to keep track of your spending. Mobile device apps are being created to track spending, and if you use them correctly, the app can give you real-time information on where you stand in each category. You lose the psychological effect that comes with handling cash, but it does accomplish a similar result.

There are other ways of limiting spending without categorizing into envelopes. Another idea is to mark on your calendar how much you get paid from your job and when and also mark how much your bills are and when they are due. By spending according to the calendar each week, you can make sure your important bills are covered and that savings goals are reached. One limitation that should be planned around is where you will keep money. If all of your money is kept in one bank account, a temptation will arise sooner or later to spend money that is accumulated. This can be avoided by creating multiple bank accounts or using envelopes for designated categories.

Best practice for micro-budgeting to limit spending is to pick categories or expenses that are variable or discretionary. You may not, for example, put cash for utility bills or rent in an envelope because cash can be inconvenient and the amounts are relatively fixed. Micro-budgeting works very well with categories of spending that are variable (i.e., groceries, recreation, household needs, clothing, etc.) or discretionary (i.e., dining out, treats, luxuries, etc.).

The amount you spend on clothing each month will vary. Some months, you may not make any purchases, and other months you may purchase one expensive item. The idea with micro-budgeting is to convert variable expenses into fixed expenses by setting aside a certain amount of money each month for a specific category. Whether you spend it all each month is a choice you have to make (i.e., micro-budgeting). Discretionary spending is where many people get into trouble financially, and assigning acceptable amounts of money to discretionary categories ensure you can still have fun but saves the guilt and mess of over-spending.

Setting Priorities

An important task is to identify your most important priorities. For most people, priorities are food, shelter, transportation, health care and clothing. These are essentials of living and are daily priorities. A key here is to express priorities in money. For example, housing may be a monthly rent paying of $750. We need to know the amount to ensure (a) it is affordable (attainable/achievable) given our income and (b) enough money is set aside each week/month to cover the expense.

Once priorities are set, you can move down the list to goals (your purpose in life) and wants (things that bring you joy). The important part is to quantify in terms of money the amount each goal and want will take to achieve each week/month. At the end of this lesson, worksheets are provided that you can use to develop a spending plan which covers your priorities without leaving off goals and wants.


There is a reason budgets are not discussed first. Nobody likes to budget!

For some people, budgets can feel confining, and for others, budgets can seem useless. Very simply, a budget is a categorized list of how you want to handle money for a given time period. Budgets are often prepared for a calendar year, but budgets are also useful for a week or month. A simple approach is to develop a budget for a full year and then develop a weekly or monthly plan to fulfill the budget.

If we started the lesson with the budget, you would have no framework to prepare the budget. Instead, what you can do now is to prepare a budget based on the categories you will use to limit spending and the amounts and categories for your priorities, goals and wants. In other words, everything we just covered in the lesson is necessary to make a budget that will actually work.

Everyone has a budget whether they know it or not. A financial counseling approach to a person struggling with money and debt is to evaluate their current spending by category and put it into budget form. Whether it works or not, the person is following a budget. It may be haphazard or always in a deficit (spending more than the income), but it is the person’s budget.

The decision we all have to face is whether spending in the categories identified in our budget is bringing us joy and achieving our purpose and goals in life. If not, then there must be some adjustment.

The basic purpose of the budget is to list all sources of income for the given time period and list by category all the planned expenses for the same time period. This is often the easy part. The hard part is executing the plan – making sure the planned income is received and staying within the limits of each spending category. The budget is going to reflect our priorities and goals and help us enjoy our wants.

The key to a successful budget is that it be achievable. Where many people go wrong and become frustrated with budgets is by resolving to spend no more than a certain amount in each category, write out the budget, and then take no steps to restrict spending or check progress. The budget is one tool among many that will help you maintain your priorities, achieve your goals, and create joy in your life.

Track Your Spending

An important part of using a budget is to check-up on your progress. There are two parts to this: Keeping track of your income and expenses and monitoring your progress.

In the banking lesson, the check register was introduced along with alternative methods of tracking deposits and withdrawals. Once your budget is developed, a very wise approach is to tag deposits and withdrawals by category. Software and mobile device apps make this simple, and it is a basic part of bookkeeping. Every deposit is tagged with a category, and every withdrawal is tagged with a category. The key is to assign category labels that correspond to the categories in your budget.

Let’s recap briefly. The budget says what you want to do with money over a future time period. Tracking your deposits and withdrawals by category is identifying what you are doing with your money in real time, such as writing deposits and withdrawals in a check register.

Now, the next step is to monitor what you did over a past time period. For this, we will use a cash flow statement.

Where the budget identifies by category what you plan to do with your money in the future, a cash flow statement shows you what you actually did with your money in the past. Cash flow statements are another form of developing and training habits. The key is to use the same categories from your budget and that you used to track deposits and withdrawals. The cash flow statement identifies if you are on-track to fulfill your budget, under budget (depositing more than planned or withdrawing less than planned), or over budget (depositing less than planned or withdrawing more than planned).

The cash flow statement is very useful to identify specific categories where you still need to make adjustments. Instead of re-working your budget entirely, this is an effective tool to narrow down your efforts to one category.

Actually, if you wanted to test your skills after completing this class, when your friend asks you what you learned, you can say that everyone has a budget whether they write it out or not. When working in financial planning, and especially financial counseling, the cash flow statement is often a valuable tool at the beginning of the process. There are several reasons for this. One is that setting a budget can be difficult, especially for a financial planner who really does not know how the client usually spends money. Starting with a cash flow statement provides a great deal of insight into the client’s spending habits.

Another reason the cash flow statement is valuable is that it helps to identify potential problems or habits that may need to be changed. You could actually take the cash flow statement, use all the same numbers and categories, and present it to the client as a budget. The cash flow statement, as a report of what actually happened over a time period in the past, reflects what the client intended to do – which is the basic definition of the budget.

Leading off with the cash flow statement provides a great discussion-starter to create a budget which reflects your priorities, goals and wants. In the process, you have already identified the categories where the most attention should be given. These categories will become the target of the most amount of effort to limit spending and change habits.

Balance Sheet

The last piece of information is a balance sheet. This tool totals everything you own and everything you owe (borrowed money). At the end of this lesson are examples of a budget and balance sheet.

The balance sheet is a necessary ingredient when planning goals and writing a budget. If your goal is to save $1,500 over 12 months, the budget should show a monthly deposit toward the goal of $125, right? What if the balance sheet showed that you already had $500 in savings? This should change the amount that goes into your budget, right?

The balance sheet should list by category everything you own. For example, cash, checking account and savings account should be on separate lines each with their own total. Any vehicles you own or other valuable things you own (assets) should also be listed. You will do the same thing with debts, or money that you borrowed.

Why are the debts important? The budget should include spending categories to pay down debts. If you were helping someone else with their budget, leaving off monthly debt payments could devastate them financially, especially if it meant their debts were not being paid. You need to know what you owe for the budget to be correct and ensure that your obligations are covered.

Before moving onto the graded assignment, please take a moment to watch the video below. This will provide some additional background on the lesson that is difficult to convey through text.