If there is one crime in the world of financial management that I am perpetually guilty of it would be the crime of double counting. Double counting, that wonderful method of counting where the same dollar can be allocated to 2 or more different spots. Then, all of a sudden, you realize that all those wonderful goals you were going to meet cannot possible be accomplished at the same time, simply because if you put your tax return in your retirement savings it can not also be used to pay down your mortgage. Darn!
I began to notice this phenomenon when I was changing jobs. As a result I had both large sums of money coming my way (severance pay, retirement savings, disability benefits etc.) as well as several large expenses coming my way (the move, retirement plan set-up, the house down payment, possibly a car etc.) all at the same time. I would tally the incoming and outgoing in my head, usually concentrating on one piece of the puzzle at a time and not always remembering that I had already allocated some of the incoming money to a major expense.
So after a couple weeks of overconfidence, followed by confusion, followed by a sense of complete horror, I started looking at ways to overcome this major problem. The simplest way I have found to do this is by writing stuff down. Sounds simple, but the best solutions usually are. Find a good place to record your finances; it can be a notebook, some files at home, or your laptop. I keep my records on my laptop since it goes pretty much every where with me, can hold loads more information then a few scraps of paper and I can format and reformat again until my heart’s content.
A part of your records should be any long term financial goals that you have (with dollar amounts if possible) as well as a list of upcoming payments if your sources of income are irregular for any part of time. Once you know for certain how much money is coming in when from a certain source assign it to the appropriate categories. Make sure you think out your allocation before jotting it down because the less you move your allocations around the less likely you’ll be to forget where your money is going.