You check your bank account and see $4200 sitting there. At first glance, things look comfortable and it can be tempting to think there is plenty available to spend.
Then the car registration arrives, an insurance premium is due, the school sends through next term’s tuition, and the car needs a service. Suddenly that healthy-looking balance starts to disappear much faster than expected.
The problem is that your bank balance only tells you how much money is sitting in the account. It does not tell you how much of that money is genuinely available to spend.
SOME OF YOUR MONEY ALREADY HAS A JOB
A portion of the money in your account may already be committed to expenses that have not arrived yet. These can include the items already mentioned, along with Christmas, holidays, memberships, and sporting costs.
Most of these expenses are reasonably predictable. We may not know the exact amount every time, but we usually know they are coming and can make an allowance for them.
The simplest way to do this is to turn irregular expenses into regular ones. If your annual car registration and insurance cost $2400, you can treat that as a $200 monthly expense and gradually put the money aside.
If you want $3000 available for Christmas and holidays each year, that can become another $250 per month. Breaking larger annual costs into smaller regular amounts can make them much easier to manage.
GIVE FUTURE SPENDING ITS OWN BUCKET
Leaving all your money in one account can make it difficult to see what is available for today and what has already been allocated for later. Separate savings buckets can create a clearer picture.
Each payday, you move a planned amount into those savings accounts, so the money is ready when the expense arrives.
Imagine your bank balance shows $4200, but $2000 of that has already been allocated to future bills and expenses. Your real available balance is closer to $2200.
That is a much more useful figure when you are deciding whether you can afford a weekend away or an unplanned purchase. It can also reduce the chance of relying on a credit card when a large annual bill arrives.
MAKE YOUR BANK BALANCE MORE USEFUL
Good money management is partly about making sure the money you already have is organised clearly enough to support better decisions. Your bank balance is still useful information, but it does not tell the whole story. Before looking at your account balance and deciding you have plenty available, ask yourself:
How much of the money in my bank account is genuinely available to spend, and how much of it already has a future job?
