Welcome to my new weekly feature where we will be talking about budgeting and saving money. I always get lots of questions about my budget so I thought today we would go over how to determine your spending.
In order to save you have to know what you spend! To create a budget you have to know where your money is going on a monthly basis.
In order to get a good idea of your spending you need to track your spending in ALL areas for 1 -3 months. Three months may seem like a long time, but the longer you track your spending, the more accurate your data will be.
To really see where your money is going you need to account for every penny you spend. If you spend 50¢ for a soda you need to write it down! This might not be a fun process but it sure is eye opening. Most people are surprised at just how much money they spend on unnecessary items each week. A cup of coffee here, a run by the drive through there can add up to quite a chunk money. Think about it, if you grab a $1.50 cup of coffee and a $5 drive through meal each week, you are spending $338 per year. Wow–that’s is more than my water bill for a entire year! Analyzing your spending can really give you great perspective!!
Once you have all the numbers and analyze your data the main goal is to find that your spending is less than your earnings! You will have a bunch of information and it will be easier to see specifics by grouping like items into categories. Often I begin with large categories and then sub-categorize as needed. You might have a large category called Auto and within the Auto category you could have subcategories such as: car payment, gas, and service. The subcategories will be helpful in determining areas where spending can be decreased.
This may take some time but the information you gather will help you determine not only where your money goes each month but also areas where you might be overspending.
Next week we will go into more detail about budget categories.
8 Comments
Mint.com is SO helpful when starting to budget. It does all the work for you.
Since we started a budget one year ago it has been like we gave ourselves a raise.
budgeting has helped my husband and I pay cash for both our cars!!!
I used my cell phone to log every penny… I either hit record on the side of the phone at each store, then at night I listen to “my sound” for the day and log it on a spreadsheet and delete… or I take a photo of each store or the recipt and again I would log each night… I did it for 2 months — it was a TRUE EYE OPENING event.. plus my kid helped me to remember to photo or record each store.. so I couldn’t forget even the $1.00 ice cream cone at McD.. LOL.. I found that I spend $10.00 a day in gas to get to work :(.. I miss the Pulix/PB gas card deals :)… but now have a gas card that pays me back 5% and I am smarter about my money… Every 5th month we do the logging game just to see what we spent and to see if we or still on track.
The best remedy for our budget was meal planning to stay out of restaurants and eating out and staying out of Wal-mart/Target, etc…
GREAT Post Michelle! I also love Mint to keep track of the budget and big picture. 🙂
I have kept a spreadsheet for all Publix trips (only store I visit) and then another spreadsheet this year for everything else, house, car, gas, medical etc. I ask for a RECEIPT whenever I buy ANYTHING, easier then writing it down (even a McD dollar menu when I eat out). Then daily/weekly, I type in all my recipts into the spreadsheet. That’s how I follow all my spending this year. Also, I went thru every regular bill (ie cable, electric etc) and checked how I could lower each bill to the lowest and did so this year! I have lived on very little getting laid off 1 1/2 years ago!
I use Yodlee (it’s free!) and it let’s you categorize every cent. It automatically pulls info from your banking and credit card accounts so you don’t have to record every single transaction you make. But it also let’s you break down single transactions into multiple categories. For example, if you spent $50 at Publix, but only $20 was on food and another $10 was for dog food and $20 for toiletries, you can divide it out so you can really keep track of your spending. And it makes pretty little charts and graphs with that info 🙂
I also use a spreadsheet I found on angus65 dot com (search for Dave Ramsey Monthly Budget Excel Spreadsheet). It helps me plan my month down to the last penny and this way I know that I’ll have enough money to cover every bill that comes my way. We’ve been through some rough months recently and it’s a load off to have that reassurance.