In 1994 I earned about $9,600 working for a non-profit. It was good experience. And I managed to live on $800 a month with relative ease. In the spring of 1995, I got my first software job. My salary was $30,000 dollars. Finally, I was earning real money.

Fast forward to the end of 1995 and I was facing a credit card bill I couldn't pay off. I was officially in debt. How had I lived on so much less without any debt? What went wrong?

One evening visiting my parents I shared my tale of woe with Brian, a family friend. He offered to help and invited me to his house that weekend. On Sunday we sat down at his kitchen table where he showed me something that changed my life: a binder.

The binder contained sheets of graph paper separated by colored dividers. Brian, who earned over 10 times what I did, kept track of his spending in this binder. His system was very simple. Each divider represented a category of expense. One for groceries, one for eating out, one for vacation, etc. Each time he was paid he allocated a portion of his pay to each section of his binder.

For example, on payday Brian added a positive entry in the groceries section for $200. Each time he bought groceries he debited the amount he spent from that section. When the balance hit zero, there was no money for groceries anymore. He did this for every section, every time he got paid.

What makes this system so effective is the focus on how much money you have in each section instead of how much money you have in the bank. That way you can always see exactly what you can afford to spend on any one expense. And you always have enough for your fixed expenses.

Brian then set about creating a budget for me so that I could have my own binder. He asked me questions about my spending and made suggestions about what categories I should use. He cautioned against categories that were overly broad or overly granular. The key was to find the right balance. I think we ended up with about 10 categories: rent, groceries, car expenses, entertainment, vacation, and the like. I would save whatever was left.

I went out and bought a binder and started doing exactly what Brian recommended. It was arduous keeping receipts and entering everything by hand but after a few months I had paid off my debt and felt on top of my spending. I haven't worried about money since.

In a short time I abandoned the binder in favor of spreadsheets and then software that I wrote myself. The software evolved to the point where I just opened it every day, looked at how I was doing and closed it again. Transactions downloaded from my bank automatically and most of them were automatically placed in the right categories.

Fast forward to today and I've turned this system into a product. I wanted other people to have what Brian gave me, so I built Piggy Banks Online. Brian's binder, now an app. I still use it every day.