Track Expenses To Help Create a Budget

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For many people creating a budget can be a huge undertaking, and simply getting started is the most common roadblock.  Why?  Because established patterns of behavior can be hard to change.  With that said, if an established pattern has become problematic – as is the case with the financial habits of many – it needs to be changed.

To make change happen let’s focus on how tracking expenses can help break bad spending habits and create a working budget.

1. Keep a spending journal

Carry a pocket moleskin notebook (or any dollar store mini-notebook) in your pocket or purse to record and categorize every financial transaction you make.  This may sound annoying or cumbersome at first, but it’s easy to implement and will play a huge role in getting a handle on where your money is going… so if you’re having problems, start doing it.

In your journal simply record 3 items for each transaction:

  • record the date – so you know when each transaction took place and how many you tend to make each day.
  • record the amount – so you know how much you’re spending.
  • record the category – so you can determine how much money to attribute to each budget category each month.

Remember to take ownership of this journal by using my suggestions as a starting point and adapting it to fit your needs.  Also remember that your categories are alive; they can be created, deleted, and changed to better fit and accommodate changes in your life.

2. Buy simple budgeting software

While You Need A Budgetyou journal your spending you should also begin downloading transactions into a budgeting software.  Doing so will further help you categorize, track, manage, and plan your financial future.

I’ve always scratched my head at people who don’t want to spend $60 on a budgeting program that will likely help them save hundreds each month, but they have no problem dropping $60 on going out to dinner every Friday night!  I encourage you to stop making excuses for not buying a budgeting program and just go buy one; it could easily be the best $60 you spend this year!  I recommend – and personally use – You Need A Budget (YNAB) for both my business and personal finances, and I love it.

If you’re worried about the $60 then simply forgo dining out a time or two this week to reclaim the cost.  If you’re not willing to make that sacrifice then you might as well quit reading now and go shopping.

3. Be disciplined and follow through

You can start your journal, purchase the budgeting software, and feel good about getting started… but if you don’t follow through and make this behavior a habit you will not be successful.  Remember that established behavior patterns are hard to change, but not impossible to change!  Making the switch to wondering where your money went to telling your money where to go will take time, discipline, and follow through.  Are you up for the challenge?

It’s time to change the course of your life.  It’s time to grab your finances by the throat and take control back.

You can do this… all you have to do is get started!

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1 Thomas

I could not agree with you more, Matt. Part of figuring out a budget is knowing what your needs are and how much they will cost. Once you have those figures nailed down, you can then see how much you have left to save and/or allocate to things you may want. My wife and I have been using YNAB for nearly two years now and absolutely love it. YNAB has greatly increased our control over our money and has, ultimately, given us the ability to be better stewards of our money.

As an anniversary present to my parents, my wife and I purchased them a copy of YNAB and offered to walk them through the process you outlined above. This process has been an eye-opening experience for them as this is the first them they’ve ever really been on a budget. My mom used to have a ritual where she would stop for breakfast after running her morning errands and she would often times eat out for lunch. She had no idea that she was spending $300+ per month on these “seemingly harmless” meals (we’re talking mostly $1 menu stuff). Now, she eats breakfast at home and packs her lunch. ; )

Great post! Happy Friday! And God Bless!

2 Matt Jabs

It made my day to read your comment Thomas. Not only have you taken steps to improve your finances… you’re also spreading the love and helping others. I love it.

3 Sree

Tracking Expenses is the BEST way to reduce spending and increase savings.
If you have an iPhone or iPod touch, there are several expense tracking apps to help you. I use the ‘Expenses’ app and type in each expense as it occurs. Its always with me, so I don’t have to carry a notebook or worry about forgetting an expense. At the end of the month I tally my monthly and yearly expenses into my Google docs spredsheet on the net.

4 Matt Jabs

I’m glad you brought this up Sree! I stopped using a mobile phone back in November of 2010 so I forgot to mention tracking expenses using your phone… which can be VERY useful. I used to do it when I had my Android phone. Thanks again and great blog… keep up the good work.

5 Ben

This is so true. Just the little things add up, for example- buying a coke in a vending machine versus wholesale. A huge difference!

6 Kristen

I started tracking my budget in January of this year and realized that most of my money was going towards clothes. Now after realizing what was happening and disciplining myself my clothing spending has been cut down to a third of what I started at.

7 Matt Jabs

This is awesome Kristen – keep up the good work! What tactics have you employed for curbing clothing spending… second hand stores, less shopping, a combination?

8 Kristen

Mostly less shopping. If I don’t go looking for new clothes on the internet or go out shopping in the stores looking for new stuff then I’m less likely to spend money.

9 Matt Jabs

Ha ha… yeah, that’ll do it! Good job Kristen, I’m proud of you for putting your needs over your wants.

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