It is a dangerous mistake to live in the future and spend money you have not yet received. Although it doesn’t sound fun in the short term, we suggest you determine the lowest amount of money you receive in a given month and work your spending plan around that amount. Of course, there may be some months that you don’t earn any income, so be reasonable but budget as conservatively as you can. It may mean that on a daily basis you miss out on some of the perks you currently enjoy in the feast months, but conversely, the famine months won’t hurt as much (if at all).

You might enjoy living life on the edge, but the stress of not being able to pay your bills in the lean months is what wrecks marriages, increases household tension, shortens tempers, and can damage relationships with your children because you are impatient and anxious.

My husband and I spent years living in the future waiting for the next big check to come along. As a partner in an entrepreneurial venture, we had the potential for big windfalls. Unfortunately, the potential wasn’t realized as frequently as we had hoped, so we ended up trying to maintain a lifestyle that was beyond our income level.

Because we “knew” that eventually we could afford it, we bought a house and car that consumed our income and left us with little to live on each month. We fooled ourselves into thinking that when extra cash rolled in, we’d finally be able to save some money and it would stretch far enough to pay for all the things we put on the back burner. In reality, we splurged a bit by eating out frequently and treating ourselves to things we couldn’t afford during our lean months. Life was a stressful roller coaster and we never got ahead of our spending.

Perhaps a bonus check comes along or you close a big deal. Rather than blowing that extra income, set it aside for the unexpected expenses that invariably occur and then to pay off debt. If you’re fortunate not to have debt, this money should be used to build a larger emergency fund (3-6 months of expenses) to serve as a security blanket in the event you are injured, lose your job, or for some reason are unable to work.

It’s easy to feel “entitled” to have nice things. After all, you work very hard for your money. It’s easy to get caught up by peer pressure to wear the latest fashions or have the coolest toys. After creating a spending plan based on the lowest month of income, you may discover that you need to do some downsizing. While it may feel overwhelmingly scary at first, I promise you that no one ever died from living within their means. You may need to evaluate what is creating the fear. Will people think less of you because you’re not driving around in a fancy car with all the bells and whistles? Why does it matter?

Learn a lesson from this updated version of Aesop’s famous fable about the ant and the grasshopper:

The ant works hard in the summer heat all season long, building his house and setting aside supplies for the barren winter. The grasshopper thinks he's a fool and laughs and dances and frolics the summer away. When winter arrives, the ant is warm, well fed, and content. The grasshopper has no food or shelter with only two choices: to die out in the cold or to beg and to be at the mercy of the ant he teased.

Stockpiling your extra cash may not sound glamorous, but neither is living today on tomorrow’s income and paying for food that you’ve eaten two years ago or purchases that have long since found their way into the trash.

Having cash reserves opens you up to innumerable opportunities: you can switch careers or jobs if you wish, you can take time to be with that new baby of yours, and you can travel to visit that sick friend or parent without worry. Peace of mind is priceless. Take that MasterCard!

Years ago we found ourselves in a similar situation and did the same fuzzy math. We were expecting year-end bonuses and thought that somehow it was okay to spend that money ahead of time since we knew it was coming to us. As is frequently the case, much of what we expected never materialized, and we found ourselves using credit cards to subsidize a standard of living that we couldn't afford. While our salaries were good, they were less than what we were spending and we got ourselves in trouble.

When we looked around our home, we didn't see a lot of big-ticket toys to show for our debt. To the contrary, we were paying for burritos from 1992 and trips to Target for who knows what. We floated through life, and since we didn't have routines in place for grocery shopping and meal planning, it was easier to pick up fast food than prepare inexpensive, nutritious meals at home. Although we built many budgets based on our historical spending, we found them hard to follow because we had unpredictable income and we didn't check in with our budget before we spent money. We based our spending on how much we had in our checking account at any given time and never factored in that we needed to set aside money this month for expenses that we would incur three months down the road. We cycled between depriving ourselves when money was lean, and then when money came in, blowing all of it to make up for what we hadn't been spending. When we finally came up for air and really looked at our finances, we found ourselves thousands of dollars in debt. We didn't know how to prioritize our expenses and spend less than we earned.

Your story may be different than ours. Your family might be facing huge medical bills or experiencing a financial downturn based on job layoffs. In an effort to fix your situation, you might have borrowed against your house, gotten a consolidation loan to lower your monthly credit card payments, signed up for additional credit cards to pay existing cards, or tried other schemes that have left you deeper in debt than before. It can be scary and overwhelming when you finally face the consequences of your spending history. You might think that you are in a vicious downward spiral that is impossible to break out of or that your situation is uniquely worse than anyone else's. These are dangerous lies that will keep you a slave of your finances.

The first step to recovery is to take stock of what you earn and itemize all of your expenses. Once you really know what your financial picture looks like, you can begin to take action and get on the road to a new freedom and happiness that doesn't include being in debt. It won't always be easy but it will be definitely worth it.

Summer heat in Houston means high electric bills. Say we budgeted $300 for electricity, but the bill came and it was $350. Since I’m fond of air conditioning and lights, I’ll pay the $350. However, when I enter the transaction, my Electricity bucket shows that it is $50 overspent. Immediately, I need to look through my other buckets for extra cash to make up the deficit. Although I have plenty of money in my Taxes bucket (for our escrow payment and various other taxes), it wouldn’t be prudent for me to take money out of there except as a very last resort, since I will need that money come tax time. It could come out of my Dry Cleaning bucket if I wash some of that laundry at home, or I could take it out of my Household bucket, which covers expenses for new drinking glasses, cleaning supplies, etc. Taking the money out of this bucket makes sense to cover the $50 shortage.

My objective is to spend less than I earn, so I don’t allow an overspent bucket to roll over from one month to the next. In some months, it may mean that our family eats a few more inexpensive spaghetti dinners at home. It’s a dangerous practice to live today on tomorrow’s money, and you should avoid this at all cost.

Here’s another scenario for couples. Say there’s only $20 left in the Automobile bucket and there are still several days to payday. Before indiscriminately spending that cash to top off my gas tank, I need to check in with my husband to see what his tank looks like. If his tank is fine, we’re in the clear; however, if his is low, we have some decisions to make. Since my car is a hybrid and gets better gas mileage, we may decide to fill up my car—or as full as you can get on $20 these days—and use it exclusively until we get paid. However, if we both have places to be at the same time, we may need to take money from a bucket with extra cash so we both can put in gas. It takes good communication skills to keep a balanced spending plan, but the benefits are immense.

It’s also a good idea to take a look at your historical information on a regular basis. You may notice that every month you overspend your Dining bucket. So long as you are making up the money from another bucket, it’s fine, but you may want to look at your spending plan to see if it makes sense to raise your spending in that category or make adjustments in how you’re using your money, especially if you’re covering the money from someplace like your Vacation bucket. Perhaps you will decide to plan your time better so you can take your lunch to work more frequently. Your Vacation bucket won’t have to take the hit and your waistline will thank you, too. It may be worth it to you to eat more homemade lunches in order to enjoy some serious beach time in February when everybody has cabin fever.

It’s unreasonable to have a “perfect” budget, and you should expect to have to rework your buckets occasionally. After all, in the real world, it’s impossible to anticipate every contingency. Your spending plan should serve you (not the other way around) by helping you to be intentional and aware of your spending habits so that your money can go towards what you truly value.

Fast forward to today. Some people like to have buckets for every single purpose. The trouble is that you have to work extra hard to juggle all your buckets and make sure there’s the right amount in each of them. Do you really have time to dissect your grocery receipt to see how much you’ve spent on food versus non-food items? When I used to do my budgeting in Quicken, that’s exactly what I tried to do, and I dreaded having to input those receipts and needlessly split out dozens of transactions.

Back in the day, I sometimes bought pantyhose at the grocery store, and I still occasionally buy certain cosmetic items there. And what about trash bags and aluminum foil? Sure, perhaps I could tell you how much I spent on cleaning products, etc. at the end of the month or year, but did it really matter? And if I didn’t break out every single occasion, my results weren’t accurate. You have better things to do than getting caught up in this minutiae. The point is that you want to become more aware of your spending habits. If you notice that your grocery budget is creeping up—or if you consistently need to “borrow” from your grocery bucket to afford some of the other items in your spending plan—then maybe it’s time to look at your grocery bucket and make some adjustments.

The reality is that at the end of the day I’d rather spend my time enjoying life instead of being trapped in front of a computer micromanaging my individual expenses. Don’t bother creating extra buckets if the things in them aren’t problematic for you or if it’s a static expense. For instance, I don’t track my payroll taxes and FICA charges from my paychecks. I get statements each pay period to see this information and a W-2 at the end of the year that shows my totals. These taxes aren’t anything I have control over, so it doesn’t make sense for me to go to the effort of splitting my transactions to capture this information. However, I break out my auto loan from my other auto expenses because I want to be sure it gets paid every month and separating it helps it to stand out.

Here’s are a few examples of my buckets and why I use them:

1. Automobile - all my gas, oil changes, maintenance, and repairs go in here—everything except the loan payments
2. Dining - I use this for fast food, finer dining, delivered pizza—basically any meals not prepared at home using groceries
3. Groceries - trips to the supermarket, farmer’s market, seafood store, etc. generally all get put in this bucket, including purchases like deodorant, shampoo, soap, cleaning supplies, batteries, and aluminum foil—If I did my grocery shopping at a place like Super Wal-Mart, I might be more careful to split out household supply items because of the potential for impulse purchases
4. Household Supplies - laundry baskets, hangers, plates, light bulbs, air filters—pretty much anything used for our household operations
5. Lawn Care - includes gardening supplies, fertilizer, mulch, and flowers in addition to the lawn service we pay every month
6. Loan-Automobile - only my car is financed, but if my husband had a loan on his car, they both would share this bucket unless the timing on the payments were different (also, the name starts with "Loan" instead of "Automobile" to make it easier to use MoneyWell’s auto-complete functionality)
7. Pet Care - pets aren’t cheap, so every pet expense we incur goes in this bucket (it's also used to show how much it costs to have one dog and give us ammunition to say “no” to our daughter’s request for a second one)
8. Personal Care - manicures, pedicures, spa appointments, massages, haircuts, and anything I purchase at these appointments—nail polish, shampoo, etc.—unlike my kids’ shampoo, which I buy at the grocery store and leave as part of my grocery bucket
9. Savings - both emergency fund money and long-term savings go into this bucket so that I don’t spend it and I can periodically transfer that money to my savings account
10. Self Improvement - this consists of exercise tapes, gym memberships, class fees, professional literature, seminars, and also includes all my magazine and web subscriptions since they are related to self improvement—leaving me with no need for a separate “Subscriptions” bucket
11. Taxes - this is for our homeowner’s association fees, property taxes, MUD taxes (a million "Intuit" years ago I also tracked sales tax—I cannot be bothered with this anymore!)

Your buckets may look different than mine, but be consistent with the types of transactions you put into them. We deliberately don’t have buckets that are hierarchal—some people call these nested or grouped—because our focus is to budget our money before we spend it, and we don’t want to hide buckets and potentially miss that we’ve overspent or underfunded them. It may be a new way of looking at your money, but hopefully you’ll discover that it’s a much more proactive way of handling your spending.

When you’re looking at organizing your buckets, remember your goal is to get control of your bad spending habits, like impulse purchases, and promote your good ones, like saving and debt reduction. Although it’s important to track every dollar of your spending, it’s not necessary to break down everything to its smallest component. When you’re trying to decide whether to add or remove a bucket, ask yourself the question, “Will having this broken out help me to control my spending?” In many cases, less is more and MoneyWell makes it easy to drag and drop transactions from one bucket to another if you feel you need to break them out later into additional buckets.

So go ahead and try simplifying your spending categories—you can always change your mind and your buckets.

Of course, it would be easier if you didn’t get into this bind in the first place, and since you’re a smart person, you should have known better. Now that you’re here it’s easy to beat yourself up and talk to yourself in a condescending way that no friend would tolerate. So let’s move on from the unproductive negative self-talk and take a hard look at what you can do to dust yourself off and break free of your compulsive spending.

1. Get real. Take an honest look at how much you make and how much you owe. If you’re serious about making a fresh start, it’s critical that you come to terms with your financial situation.
2. Emancipate yourself. Feel the full force of the pain you are in of being a prisoner of your finances. Grab a calculator and about two years of your credit card receipts and add up all the interest you’ve paid to the credit card companies. Take a moment and think about what else you could have done with that money. You need to be hopping mad and fed up by how much of your hard-earned money you’re giving to these guys. I truly believe that if you aren’t in enough pain, you won’t muster the strength it takes to burrow out from your debt.
3. Grab the scissors. It’s time to cut up the credit cards and stop using money you don’t have to give yourself the illusion of something you’re not. The world may say that people who spend freely and buy whatever they want are the be-all and end-all, but it’s a lie. The knots in your stomach when bills are due or when a creditor calls or when you’re in a checkout line and holding your breath to see if your card will be accepted are not worth the momentary thrill of new stuff.
4. Face your fears. It’s hard to let people know your dirty little secret. You’ve worked hard to keep up the illusion that you have money. What will people think of you if you can’t buy the latest toy or if you can’t go out to lunch every day with the gang? Who cares? If you do, why? Does pretending to have money or feeling superior to someone else make you a better person? Are you a nicer guy or gal because you’re dressed in designer clothes? At the end of the day, maybe you’re just another bozo on the bus. Is that so bad? Why? Take a good look at who you are and what your values are and what you respect and why.
5. Become humble. Hopefully, after a bit of soul searching you came to the same conclusion I did: The people who truly love me do so because they like who I am, not what I have, and those who think otherwise aren’t important in my life and don’t have values that I respect. Once I became committed to reclaiming my freedom, I became willing to let go of my “stuff.” When you’re willing to let go of everything you have, you discover that you possess a priceless gift: the realization that what you have doesn’t define you. Embrace this truth and find peace in discovering that you won’t die without the latest widget and, although it may be uncomfortable at first, you are more powerful than your possessions.
6. Set goals. Hopefully, you’re in enough pain that you’re willing to go the distance to fully get your finances in order. To stay the course, it’s important to have some rewards and goals in place to make the journey easier. That $3 latte every day may seem harmless, but is it bringing you nearly $1100 worth of pleasure? Maybe you’ve been wanting a new couch, but you never seem to be able to scrape up enough money to buy one. Post a picture of your dream couch over your coffee pot so you can stay connected to why you’re not ordering out. Go ahead and buy the Starbucks’ beans if they taste so much better. The point isn’t about deprivation but rather making intentional choices for yourself.
7. Renew yourself daily. Some habits take longer to break than others. Living within your means—and hopefully well below them—takes time and discipline. It’s easy to sacrifice and scrimp for a while but even easier to then feel sorry for yourself and splurge on one big purchase that negates all your efforts. Remind yourself daily that you can change your financial situation, one day at a time. Keep your goals in sight and don’t overwhelm yourself with the notions that you’ll never get to spend money on anything fun again. It takes a shift in thinking, but you’ll feel better about the situation if you don’t see your new way of spending as sacrifice. Instead, see that you have stopped being a victim of your finances and are taking steps to be a master of them.
8. Forego perfectionism. Recognize that despite your best efforts, certain situations will arise that you aren’t prepared for, job circumstances may change unexpectedly, and monkey wrenches sometimes foul up the best-laid plans. Understand that you are trying to do the best you can and recognize that it may not always look perfect. Dust yourself off, congratulate your efforts, and do the best job you can. You’ll find that spending less can be a game with its own rewards and satisfactions, and even done imperfectly can be enormously satisfying.

In the end you need to realize that you have the power over your financial future. Even if you’ve made mistakes along the way, it’s never too late to take control and stop being a victim. Spending is a lot more fun when it’s on your own terms.

As Americans, we love to spend more than we make and we are being offered the tools do to it all the time. How many offers for credit cards do you get in the mail each month? Me, I think I get about a dozen. Let's see, if I was approved for all of those, I could have almost 150 new credit cards each year! So why is getting control of your spending so important? The simple answer is that debt leads to more debt and can ruin your life and your family.

How often can you tie a fight with your spouse to money? Probably a good percentage of the time. Have you ever had a bill collector call or send you a letter? Do you feel warm and fuzzy because he cared enough to call? Probably not.

Credit card balances are debt. So is that loan from Uncle Phil (and you don't want Aunt Donna to think you welshed on a loan, do you?). Your mortgage or your new car loan can be distinguished from unsecured debt because the lien holder will repossess these items to fulfill your loan if you don't make your monthly payment. You won't have the debt or your car. Even though secured loans aren't technically debt, you have to be very careful about buying things when you can't afford the monthly payment. It's a very quick way to end up in debt because you had to borrow money to get that new car repaired and you have no money left because the loan payment was so high. There's a good book that is easy to read and lays all this out nicely. Check out How to Get Out of Debt, Stay Out of Debt & Live Prosperously by Jerrold Mundis to learn more about defining debt.

Now that you know that debt is bad (like this was some dark secret), how do you go about getting control of your spending? By creating a spending plan of course! You can call it a budget if you want, but I relate budget to money as I do diet to food. No one wants to go on a diet because you are so restricted from eating certain foods. It's way too oppressive. Budgets can feel the same way. Even in the software business, when I worked for a larger company, we had a research & development budget. This meant that we had a cap on our creativity. We couldn't write the world's greatest software product because we had to get approval first. Ugh! Nasty.

A spending plan is much more flexible. Group your spending into categories (or buckets if you are using MoneyWell) and decide how much you are going to spend on each. Then if you want to go out to dinner, but you have no money left in that bucket, you simply can take it from another bucket. There's no shame or asking for approval because you are not going into debt, you're simply reallocating money that you were going to spend on something else.

Make your spending plan something you can comfortably live with and not and something that screams, "You're on a tight budget! You can't have fun!" Make a bucket or two for fun. Go to a movie once in a while. Have a nice meal. Buy some fun, cool software (that last one was supposed to be subliminal, work with me here). If all you ever eat is egg whites and skinless chicken, you're most likely going to break and end up bingeing at Ben and Jerry's. The same goes for designing your plan: If it is too restrictive, you'll probably end up on a binge that will make the CEO of Visa whoop for joy.

The hard rule here is that you can't swipe that credit card. You are only making Mastercard and Visa rich. They may try to convince you that sliding that card is "priceless," but there is a huge price: your financial security! With the advent of debit cards that are as accepted as credit cards, there is really no argument for saying, "But I need my credit card to rent a car!" Just dump the revolving credit. Trust me, Mastercard and Visa are not going to ask the government to bail them out because of a lack of earnings. I think they've made enough off of me alone to improve their earning reports in years past.

You don't have to buy either MoneyWell or Debt Quencher to get control of your spending (even though I happen to think those are fantastic tools), but you do have to start tracking your spending somehow and you cannot, under any circumstance, get deeper into debt. It's your happiness: Take control now.

You wanna hear the stupidest thing I’ve done? I’ve bought things because of an incredible deal but I did it with my credit card! The same credit card that charges me a minimum of 18% interest! Here’s where the jester whacks himself in the head with the rubber bat (the audience laughs in approval). What kind of savings do you have to get to make the compound interest charges worth jumping on a sale when you don’t have cash to buy something? No sale that I’ve ever been to, that’s for sure. But I have done it over and over in my life. I think my problem is that I’m an optimist — which is usually a very good thing, except when you are making purchasing decisions. Usually being an optimist in life is great because it keeps you from worrying about all that useless junk that may never happen, but in matters of finance, the pessimist wins.

Nothing Will Ever Go Wrong

One of my favorite faux pas has been the classic, “these payments are going to be easy to make with my current salary” justification. Top it with the, “and I could even pay it off early” support statement, and you have the makings of an optimistic nightmare. The jester now sports a blindfold and starts to juggle butcher knives. You see, we optimists don’t expect the car to break down or a kid to get sick or a company to go bankrupt. We expect to collect our paycheck, tithe 10%, buy some groceries, pay the mortgage, fulfill our credit obligations and, of course, have money left over for savings (oohs and aahs rise from the audience as the jester drops two knives, barely missing some of his more critical appendages). Hey, face it, life is full of little — and not so little — surprises. The car does break down (and your second car needs tires at the same time) and sudden bills do pop up. There is never a good reason to expect that you will be able to cruise along, pile up credit charges, and have no surprises. Don’t play the fool!

Another great reason for spending money when you have none is the “no payments” deals. You know the type that have no payments and no interest for 20 years or so? All right, I’m exaggerating; the grace period is usually 6 to 18 months before you start paying. This always sounds great, and actually would be, if you invested the money you have to pay for this item in a high-yield account. I have done this and it works great (er…wait, no that’s what I did in my head as I was signing the credit documents.) What I actually did was spend the money I had on some emergency or worse — some extravagance! You did notice that I’m still dressed in this silly multi-colored jumpsuit, right? But I’m changing, slowly but surely. I have to change — the jester has become much less entertaining and much too depressing to watch any more.

So how do I stop playing the fool? First, I have to set aside my urges to snatch up a fantastic deal. Great sales are happening all the time, especially with the cool stuff I like to buy — technology items. Computers, camcorders, iPods, televisions, and appliances are always getting better and dropping in price. The computer I’m writing this on has been made obsolete by four generations of Mac notebooks that are faster, better and cheaper. Patience pays when buying new technology.

Can’t Afford It? Charge It!

It’s hard to be patient though when I see something that is cool and new and would go perfect with my new Lexus (that I don’t really have). Oooo! I should buy a new Lexus! The jester is has now switched to juggling hand grenades. Okay, so I have little or no self-control. Now I need to ask the really tough question, “If I need this and this is such a great deal, why don’t I just pay cash for it?” If my answer is, “Because I don’t have enough cash,” then why am I even considering this purchase?!?! Am I dumb enough to think that the pleasure of owning that knick-knack is going to override the pain of the never-ending credit card bills? The jester has changed juggling venues to the edge of a ten-story building while doing Jell-O shots.

Let’s face facts: many of us are not safe with credit cards. Like the jester juggling knives and explosives, it’s only a matter of time before we hurt ourselves with them. So don’t feel bad if you can’t manage credit well; it is a national epidemic. Just do the right thing and slice and dice those plastic daggers. I know that if I have them around, I use them, so I had to eliminate them from my life. I chose to switch to a bank debit card that also can be used as a credit card. The dwindling cash balance in my account keeps me in line better than the threat of future interest charges. I still have to work to avoid store payment plans, but I’ve stopped building my mountain of credit card debt.

Who’s Getting My Money?

Unfortunately, now I had my own little Mount Everest to grind down. I needed to find out how much money I was funneling to my creditors and if there was some way to pay down my debt quicker and save some cash in the process. I found an inexpensive software tool that told me how long it would take for me to become debt free. It wasn’t the easiest or prettiest program, but it got the job done. I had a plan for paying down my debt.

Shortly after I purchased this tool, the supporting website disappeared along with all trace of how to get help or updates for the product. That was my inspiration for developing Debt Quencher. I wanted a tool that would compare my savings if I paid my lowest balance card first versus my highest interest card. I’m the kind of person that needs to feel like I’m accomplishing something or I tend to give up on it. Paying off even one of my cards is a huge victory for me. By using the comparisons in Debt Quencher, I saw that the difference was less than five dollars. That made the decision a no-brainer, even for a jester like me. I was even able to shave months off my payoff period by tossing just a few extra dollars a month on my lowest balance card payment.

Do you know how much credit you have outstanding right now? Do you know how much interest you’re paying per month? Per year? It’s not too late to get out of debt. If you have made credit mistakes in the past or have had to use credit cards to bail yourself out of a crisis, don’t be discouraged; there is light at the end of the tunnel. First, find a way to track what you owe (Debt Quencher). Next, call your credit card companies and ask for a lower interest rate. Many of them will do it just because you asked. Get on a cash basis for all new purchases and make paying down your credit a priority over any non-essential expense. Once a card gets paid off, close you account so you are not tempted to use it to impulse buy again.

Trust me, life is so much better when you are not a slave to credit. Playing the credit jester is just one small step up from being a mime — and you know how much everyone loves mimes.

What are the Buckets for?

If you've ever heard of someone labeling envelopes with categories of spending (e.g., rent, groceries, clothing, etc.) and sticking the money from their paycheck into them, then you understand the basics of MoneyWell buckets.

To control how much you spend, you only give yourself a limited amount each month for each category. Each bucket represents a category. So if you decide to only spend $400 per month on groceries, you would give the bucket labeled "Groceries" a $400 planned amount and then take $400 each month from your "Salary" bucket and put it in the "Groceries" bucket. Now as you spend money at the supermarket, you assign those transactions to that bucket and the amount remaining decreases until you have nothing left to spend. Visually in MoneyWell, you'll see the bucket tip over and dim out to show it's empty.

The hardest part of controlling spending is knowing where all the money went. The design of MoneyWell is all around giving you a visual of where you have money to spend and where you don't. The main window shows you how much is left in each bucket without any need for running reports. Just look at the buckets to know if you are on track.

Rollovers and Money Flows

Okay, buckets aren't that tricky, but how do I get money into the buckets?

When you add a transaction to MoneyWell, you should always assign it to a bucket. If that transaction is a deposit, then you are adding money to the bucket and, conversely, a withdrawal removes money from a bucket. So all you need to do is track all your transactions and put them in a bucket and MoneyWell takes care of the rest.

When you first start using the program, it will ask you about doing an initial rollover. Rollovers are a way to keep money flowing from month to month. You may not spend all your budgeted grocery money this month and you shouldn't lose that money for next month so MoneyWell rolls it over and starts your next month's grocery bucket with the extra cash from the previous month. The initial rollover is just a way to tell MoneyWell how much money you have on hand right now. This may be a different amount from your bank balance.

When you allocate money from your income buckets to your expense buckets, it's like cashing your paycheck and dividing up the cash into stacks and dropping those stacks into different buckets. These are called money flows and happen any time you want to move money from one bucket to another. After you allocate income, you'll see the expense buckets turn upright and show an amount you can spend for each.

Setting Bucket Limits

How does MoneyWell know how much to put in each bucket?

To effectively control your spending, you need to create a plan for limiting your spending in each bucket. The spending plan in MoneyWell is that plan. It's like a budget, but more flexible (this is discussed more in other articles). Your spending plan effectively draws a "fill to here" line on each bucket. When you allocate income, you are taking money from your income buckets and filling the expense buckets to the fill lines.

This helps you automate the process and also forces you to make some decisions about where you want to spend your money. You will find out quickly if your planned spending goes over your actual income.

Let It Flow

Let's wrap up by giving a simple overview of your money flow. Here's what you have to do once in the beginning:

1. The first time you run MoneyWell, you do an initial rollover to tell it how much money you have on hand right now
2. You create a spending plan and decide how much you want to spend each month in each bucket, effectively drawing a "fill to here" line on each

Now you will do the following items throughout each month:

1. You enter all your transactions as either deposits or withdrawals and assign each to a bucket
2. After you enter a deposit transaction to an income bucket, you can allocate income, which flows your money into your expense buckets
3. As you spend money, you watch your buckets and stop when each specific bucket tips over
4. If you need extra money for a bucket, you can take money from another by dragging the first to the second to create a money flow (here's a bit of that flexibility compared to a budget)
5. At the start of each month, let MoneyWell rollover the remaining cash in your buckets to the new month

Once you get used to the way money flows in and out of your buckets, it will become very easy to adjust your spending. There is also a graph on the main window that gives you historic feedback on your spending habits that you can use to adjust your spending plan whenever necessary.

Remember to track every transaction, adjust your plan when things change, and never spend more than you have in your buckets. Do these simple steps and you will take control of your spending.

I can't blame them. One of my pet peeves is poor service. I knew that I couldn't create perfect software—no one can unless it does little or nothing—so the next best things would be to fix problems quickly and respond to requests promptly. So don't spread it around to the competition, but our secret weapon is over-the-top customer service.

What does it mean to be "over the top" with service? It means that email requests are handled within minutes, when possible, and within a couple of hours during crunch times and off hours. It means that we offer a 60-day money back guarantee without requiring any proof of problems—we do need your feedback though, so please tell us why our products didn't work for you. It means that we won't create ridiculous copy-protection schemes that make you jump through hoops to run our software on your computers. It means that we actually care about our customers and their well-being.

Now this doesn't seem so tricky, but the fact is that many, many companies blow it when it comes to customer service. They don't answer emails, don't give refunds, are suspicious about customers stealing licenses, and frankly, some even see dealing with customers as a burden!

The choice to offer great service or not is pretty simple. As a microISV, we can't afford bad press. Our marketing budget is tiny; therefore, we rely on word of mouth and comments posted on the web and in print. If the comments are negative, then we just bought some lousy advertising with our actions or lack thereof.

When I started developing MoneyWell, the personal finance software market on the Mac was pretty crowded but not so much that I was concerned about MoneyWell standing out. It has a pretty unique design and the envelope budgeting methodology was not widely implemented. By the time MoneyWell shipped, it felt like the competition had doubled and, in the nine months since, it's grown even more packed. To stand out, we needed more than just a great feature set, we needed a great company. Apple gets a ton of free advertising because it has a zealous fan base so why not try to duplicate that marketing method.

In order to balance my time for design and coding with handling support emails, I had to make sure I was very disciplined. First, I made sure my inbox was kept as close to zero emails as possible. I couldn't afford to feel overwhelmed by the sight of hundreds of emails. I became very good at email triage: deleting or filing emails that just didn't need to hang around and answering the short tech support questions quickly.

Next I watched for patterns of tech support questions and looked for solutions that didn't require me to repeat the same answer over and over again. Sometimes this meant changing the software and putting out a quick patch. Other times this meant posting an FAQ or tutorial on the website. I started trying to write detailed step-by-step instructions and then I found that these took up a lot of my time and confused some customers. The solution was to do video tutorials or screencasts.

People love our video tutorials and I love being able to redirect them to these before having to write lengthy email responses. Video tutorials are relatively quick to do. I write a script, record the voiceover and then record the software in action. It helps that my wife, Judy, is a trained voiceover artist, but the bottom line is that customers can watch a tutorial over and over until it sinks in. We produce it once and it get used thousands of times.

As an added bonus, these videos are also used for marketing MoneyWell.

This really is the key to excellent customer service: What can I do to empower my customers instead of making them always reliant on me?

The best service is when we don't have to do anything at all. Just by going to our website, an answer is found. Just by opening our software, the customer is notified of an update. Just by posting a question to our user forum, other customers jump in to offer help.

Service is also about honesty. If I make a mistake, I need to fall on the sword. Most people are going to rush to my defense when I don't try to make excuses and shield myself from criticism. I can't tell you how many times I've immediately apologized for a bug or a missed response only to have a customer write, "Hey that's fine. You're doing a great job. Thanks!" At times, the hardest thing for me to do is swallow my pride and take the blame but I know it's the right thing to do. All I have to think is, "Would I rather be right or have lots of happy customers?" Uh, let's see... yeah, gimme the happy customers.

When I hear other companies complain about their customers, I cringe. Even if those comments don't get back to your customer base, your bad attitude will seep through during your conversations with them. If you don't deal with people well, then you'd better hire someone who does. You can't afford to play the part of the "Soup Nazi" unless you have a product that has no competition.

I have built companies with 40 or more employees and it is difficult to keep the quality of service high as the layers between me and the customers increase, but I'm very determined this time to keep any loss of service to a minimum. Judy starting full time with No Thirst Software on July 1 will help immensely and we won't hire our first tech support person unless he or she is passionate about our products.

By focusing on our customers' happiness and well-being, everything we do is affected. We can't control our incoming cash flow directly because we can't force people to buy our software and affect sales directly. What we can do is take excellent care of our existing customers and optimize how we spend our time. I believe creating great software and supporting it with over-the-top customer service is the best way to grow this company.

Let me know if you see us dropping the ball on this and we'll get to test out how well I fall on the sword.

Peace.