Monday, 2 July 2012

Third Purse Budgeting

Like a lot of people I struggle to see if the moneysaving tips etc that I am using make a material difference.  The trouble is everything gets taken out of the black hole that is my bank account and more often than not the balance at the end of the month does not reflect the time and effort that I have put in.  Of course that's when it  is all too easy to wobble and fall off the wagon.  The other day though I came across the Third Purse concept for household budgeting.  This shows you clearly what you have left in your monthly budget, the value of what assets you have stockpiled, and the combined savings you have made and can therefore put towards your wish list.
The system is one devised (as far as I know) by a forum user called Mothership over at here is the challenge post which explains it all in detail and includes many tips and ideas - although the offers mentioned are UK based the method would work anywhere.

The idea is that you have three purses (virtual or real depending on how you run your finances)

Purse 1 contains your monthly budget.  In my case this is for food, pet food, and household stuff and is £500 a month.

Purse 2 contains a float of extra money for you to dip into if you want to buy items (on offer) to stockpile.  So if I buy extra boxes of teabags say because they are £3 rather than £5 this is the purse that I take the money from. This float is replenished when you use something from your stockpile as you then transfer some money for that item only from purse 1; in effect you are buying it from yourself rather than the supermarket.  You can choose to give purse 2 the full (pre-offer) value, the offer value (for those things you wouldn't ever consider buying unless they are on offer) or (if purse 1 is empty near the end of the month) nothing. Obviously the float will increase fastest if you stick to paying purse 2 the full price. The money in purse 2 increases until a maximum value is reached - for ease of use most people on the forum pick a round number like £100; as a beginner though I am going to use £20 as my start point and the stockpile I already have as my own "shop stock" so this should go up fairly quickly.  In the beginning I also plan to transfer £10 a month to top up purse 2 at the beginning of the month until £100 is reached.

Purse 3 contains the savings you have made.  Whenever purse 2 goes over your maximum value then transfer the overflow to purse 3.  This is the money available for your wish list.

In order to keep abreast of which pot has what I plan to use a spreadsheet although a pad and pen would also work.  If you hate paperwork then using real cash and 2 separate real purses could be the way to go.

So here is my summary statement for my household budget for the start of July
Purse 1 - £500
Purse 2- £20
Purse 3 - £0

Hopefully by August purse 3 should be filling up too.  We'll see.

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