Weekly Money!!
Most of us who budget, do so on a monthly basis. This makes sense because most bills are monthly (like rent, mortgage payments and utilities). However, this “monthly view” can make it difficult for some of us to manage our spending. If you have created a budget with all the best of intentions and failed to revisit it for months, you are not alone. If you go into the month consulting your budget and planning to do better than last month, only to get to the end of this month and think, “what happened!?!,” you are not alone.
If we want to eat well or exercise more or we often think about it from a weekly perspective. We might plan out our weekly menu or fitness regimen. This makes it easier to manage our day-to-day to align our behavior with our intentions and it also gives us a fresh start each week!! Enter: Weekly Money!!
Practice Makes Permanent
Many of us were raised hearing that either “practice makes perfect” or “practice makes permanent.” Indeed, life often reflects pattern. A healthy relationship (professional or personal) is built on the foundation of a thousand intentional moments of communication and partnership. Physical fitness often reflects eating and exercise habits. Of course, even when we establish the healthiest of practices, we can be sidelined by some uncontrollable factors. But oftentimes, when we look at what is working well, we can see that we are engaged in some regular beneficial behavior.
Deliberate Practice Incorporates Regular Feedback
Psychologist K. Anders Ericsson is often cited as discovering and publishing the concept that it takes 10,000 hours to achieve mastery in a discipline. It is not as well known that Ericsson’s research on high achievers revealed that they engage in “deliberate practice.” One of the key elements of deliberate practice is regular feedback. No wonder so many of us struggle to achieve our financial goals. How often do we get feedback and what opportunities do we give ourselves to make adjustments and then get more feedback to see if our adjustments are beneficial. Perhaps, monthly is not enough! Through Weekly Money, we receive feedback at least every week and we can start fresh on the following week and make adjustments.
What kind of feedback does Weekly Money provide?
Our special recipe for “Weekly Money” includes reviewing our actions of the past week (State of the Union) and discovering the outcome of our behaviors (Weekly Scorecard). Note, you don’t necessarily have to do both, if one of these forms of feedback resonates much more than the other.
What’s in a week?
The first step to practicing “Weekly Money” is to determine when you week begins and ends. My week starts on Sunday and ends on Saturday. So every Saturday, I review the State of the Union and my Weekly Scorecard.
State of the Union
There are five figures that contribute to the State of the Union:
Starting Checking Account Balance (typically the balance from the prior Saturday)
Activity to Date (what has gone in and out of my checking account since the prior Saturday)
Note: this is the appropriate time to pay for all credit card transactions incurred during the past week, so that those transactions can be recognized as part of the activity to date
Current Checking Account Balance
Anticipated Transactions for remainder of the month
Unreserved Checking Account Balance (aka URCAB: Current Checking Account Balance minus Anticipated Transactions)
The URCAB helps us to ensure we have enough cash on hand and coming in for the rest of the month to cover our expected transactions!
Easy Money
There are a few optional practices that make the State of the Union portion of Weekly Money easy!
Cash Envelope System - Spending cash for certain expenses has been proven to reduce spending and produces the additional benefit of reducing the number of weekly credit card transactions. There are several expenses that lend well to cash:
a. Groceries
b. Auto Gas
c. Pocket Leisure Funds
d. Gifts
FREE Money Accounts - One of our FAVORITE financial tools, “FREE Money Accounts” is a way of separating all your leisure funds. You establish a FREE Money Credit Card and a FREE Money Checking Account. All your funds for eating out, entertainment, travel and anything else that is discretionary and not set up for autopay (like subscriptions) would come from your FREE money accounts. There are two major benefits: Ease, because you’ll always be clear about how much you have available to spend. When the account is empty, just stop spending until you have the ability to fund it again. Fun, because it’s rewarding to fund the FREE Money accounts and know you have the freedom to spend these funds as you please!
Weekly Money IS Easy Money! Keep in mind that by checking in once per week, once you get the hang of, it the weekly check in won’t take more than a few minutes.
Weekly Scorecard aka “Fun Money”
This is the fun part.. well it is for this particular personal finance geek!
Just like with the State of the Union, there are five figures that contribute to the Weekly Scorecard:
Income (how money money did I earn this week)
Expenses (how much did I spend this week)
Net Income (Income minus Expenses)
Contributions to Savings/Investment Basis (Funds saved or Invested)
Net Cash Flow (Net Income minus Contributions)
I make a game out of seeing how many weeks of positive net income and positive net cash flow I can string together in a row! Obviously, if you get paid every other week, it’s hard to generate positive Net Income on weeks when you do not get paid. There are several ways around this:
Biweekly Money: If you get paid bi-weekly, you can always look at the your scorecard on a bi-weekly basis. This is the easiest fix!! (Hint: If you do this, we still encourage you to look at the State of the Union once per week)
Don’t sweat it too hard: The awareness that comes from looking at your money each week will provide you with enough feedback to improve. You could forecast your cash flow for the upcoming week and even though you expect it to be negative, you can check to see if it at least went as you intended it to go
Moderate Engagement: Or, you could line up as many expenses as you can with your income. This is harder to do if you have lots of automatic payments and that’s ok.
Maximum Engagement; Or, you could have your income come into one bank account and funnel those expenses into a separate “income account” from which you pay your bills. In that case, you get to decide when you recognize the income and you can line it up with when the expenses go out. These extra steps take time to set up and probably a couple of months to get used to. However, once you do, it’s the easiest way to line up many weeks in a row of positive net income and positive net cash flow.
Reserve Accounts
What if you have are going on a trip to Zanzibar 18 months from now and the trip will cost $5,000. Will you have a week of very negative income the week of the trip? Not necessarily! We encourage funding reserve accounts for any expenses that don’t recur each month. In the case of the Zanzibar trip, if I want to have $5,000 18 months from now, I will fund $278 into the reserve account each month. The $278 will be part of my weekly expenses for one of the weeks of each month. 18 months from now when I go to Zanzibar, I will not have any expense at at all! It’s already been paid for over the past 18 months. It’s wise to treat all non recurring expense this way including savings for auto repairs, home repairs and even annual expenses, like property taxes (if they are not handled by a mortgage servicer).
Summary
We budget monthly, but it’s highly beneficial to review the results of our financial actions weekly
What we practice tends to stick
If we get regular feedback, we can adjust our actions to be more beneficial
Weekly Money gives us a fresh start each week!
Weekly Money includes the State of the Union and the Weekly Scorecard
Those of us who are paid bi-weekly may find it difficult to achieve positive net income and/or positive net cash flow each week. However, an easy fix is to look at the scorecard portion bi-weekly. The feedback is highly valuable!
Use Reserve Accounts to avoid “bad weeks” by setting aside funds in advance
What practice can you engage in that will provide you with weekly feedback?