[quote name='Dead of Knight']I wouldn't follow the latest article though:
http://www.getrichslowly.org/blog/2008/04/07/use-reverse-credit-to-stick-to-your-budget/
A lot of gift cards expire in a year and if a company goes out of business, like CompUSA, they may refuse to accept giftcards anymore. Just a really
ing bad idea. Not horrible in theory, but really
ing stupid in practice.[/quote]
Not necessarily. The flaw in it is using a particular store's card. This system will work if you use a prepaid gift card from a credit card vendor which will probably be accepted by most places. I like the
Amex one myself. Sure there's a chance that major money issuers can also go out of business (Bear Stearns is a financial cautionary tale) but the chances are still low.
As for the OP, the envelope method works but I don't like envelopes - too easy to steal or too tempting to use before an intended big purchase. I think it's far easier to have separate accounts for them. It's not too difficult to find a place that offers a zero balance checking account so get a minimum of 3. The first one is solely for bills/monthly expenses (like groceries/rent) & and the majority of your earnings should fall here. The second one is primarily for large purchases (such as a car) and secondarily as a bill/expense buffer (when your 1st account isn't enough to cover your monthly bills - this should happen rarely if at all; you should have budgeted your 1st account to cover all your bills). The third one is for small/discretionary purchases (fun money for video games, movies, whatever).
Now, how this will work is through ratios. As I mentioned, most of your earning take should go into your 1st account - bills & expenses. Depending on what you earn, this could be as low as 50% or as high as 90% (and if it's 90%,
find a new job and put everything into paying bills while you're looking; you ain't got time to play). The remaining portion, regardless of whatever went into your first account, will be split 75/25% between your 2nd & 3rd account respectively. In the beginning, this will be on a per-paycheck basis as you probably don't know what your expenses are yet so these accounts will be in flux. After you sort everything out, you can settle on a percentage (I'm at 65/27/8 myself - that's 65% from my total earnings and a 75/25 split from the remaining 35% which is 27% and 8% from my total earnings) and then stick to it, even after you get a raise or find a better paying job. The reason for not changing your percentage is that it prevents you from being greedy (in the wrong way as there are 'right' ways to be greedy) and temptation to splurge. Only change the percentage when one thing happens - your first account is not enough to cover your bills.
Now, here's the rules governing the accounts. The first account will always be looked/used at on a weekly basis (preferably on a Sunday or Thursday so you are thus able to pay any debts before the working week or the weekend starts). The second account will be looked at every month and
maybe used every 3-6 months. This is solely for buying big stuff and not paying for bills, even if what you buy gives you bills. If that happens (such as buying a tv or car), you simply shift the amount normally assigned to pay for the 2nd account into the 1st account and then redivide the 25% going into the 3rd account into another 75/25 split and again, 75% goes into the 2nd account while 25% goes into the 3rd account. The third account, aside from depositing, will only be looked at/used once a month. This removes the temptation of dipping into it every so often. It also forces you to be economical about your fun - will I buy a video game today? Go out partying? Beer? Pizza? Etc.
Since you're a college student, you can probably find a decent job that pays about 8 (
Cal min wage according to wiki; 9.36 if in San Fran) or 9 an hour). So that means you stand to make, at minimum, $320 gross on a 40 hr work week. This is $1280 per month & $15360 per year. Now, let's say, for ease of calculation, that, after bills, expenses & taxes, you only have $400 left after one month. On a 75/25 split, that's $300 and $100 respectively. Now, let's say you kept receiving the same amount and don't touch the 2nd and 3rd accounts for one year. Now, your year end total is $3600 and $1200 respectively. The 2nd account, for your patience, affords you a nice big screen HD tv. And the 3rd account rewards you w/ enough for 2 PS3s or a PS3 and $600 worth of games. And that's off a min wage job.
Now, if you want to make things a bit more dire, let's say you only had $100 left over after one month. After one year, you still have $900 & $300 respectively. That's enough for a PS3 and $300 in games or a PS3 and an iPhone (if you combine the remaining $300 w/ the $300 in the 3rd account).
And I haven't even talked about the possibility of opening up your own business so you can take advantage of all the possible tax deductions.
It's possible to find money - you just have to learn the art of money management & delayed gratification.
