Every dollar you bring home should have a name and a home. By giving it a name, you are giving it a purpose and a designation, and will be less likely to spend it on something else.
If your rent money is $1,000, you should have $1,000 set aside and named “rent money.” By naming that money, you are giving it a purpose and a destination. After all, you’re not likely to spend your rent money on new clothes or gas, if you know it’s rent money.
It’s a change in thinking, and a strategy used to create budgets. Most people think in terms of what they owe. They think, “I owe $100 for electricity.” However, that’s not as effective as stating, “I have $100 set aside for the electric bill. It’s my ‘electric bill money.’” You can do the same thing with all your other bills. Some easy names include “gym membership money,” “grocery money,” and “gas money.”
It’s really all about saving money, budgeting effectively, and giving yourself peace of mind. If you name and set aside specific dollar amounts to pay all your bills and expenses, you are ensuring that those bills and expenses get paid on time.
By following this simple money management rule, you are potentially saving money on fees and interest charges that you might otherwise incur if you didn’t give your money a name. You’re also not scrambling at the last minute to come up with your bill money. It’s already been set aside and earmarked. It’s a fast, easy way to create a budget and stick to that budget.