Building a Better Budget
Have you ever gotten to the end of the month and been shocked by your credit or debit card statement? ‘What jerk stole my card and spent all my money?’ you may wonder. Certain it wasn’t you, you scan your purchases for a tell-tale shopping spree or flight to Tahiti that you didn’t take; but in the end you must admit that the jerk that spent all your money was you.
Don’t despair. Better budgeting isn’t that hard and it certainly doesn’t require hiring a full-time personal accountant. Like almost anything worth doing though, it does take a bit of practice and a grain of discipline. The first step: knowing where your money is going.
Save your receipts
Decide on a place you will put your receipts immediately after the cashier hands it to you. Ladies, pick a pocket in your purse or, if you change purses often, tuck them in your wallet or a change purse. Gentlemen, your wallet is probably the best place.
Yes, every receipt
For this to work, you must be thorough. That means every receipt must go in your stack. That coffee you pick up on the way to work? Better get a receipt. Ditto to the lunch you go out for every day. This is where that grain of discipline comes in.
Beware the out of the ordinary
Be especially careful to get receipts (or jot down what you spend) from purchases at sources like farmer’s markets or online orders, where you’re less likely to be handed a receipt.
Track your spending
Once a week, pull out your receipt pile and enter them into a spreadsheet in a program like Excel. Sort the expenses into categories like groceries, out-to-eat, entertainment, gas, etc. Also include other expenses: rent or mortgage, insurance payments, and all your bills, from water to cable to mobile phone.
Cross check
Compare what you think you spent to your credit card or bank statement. Chances are, especially at first, you will have missed some expenses.
Analyse
Now this is the hard part: being honest with yourself. Really look at what you spent and where you spent it. If you’re not ready to be critical and make changes in your spending habits, all the receipt-saving in the world isn’t going to help. Everyone’s lifestyle is a little different, so identify what expenses are surprising or out of control.
Prioritise
Decide what is important to you and what you want to change. Let’s say you discovered that you spend $100 a month on coffee (that’s $5 per work day). If that leaves you feeling appalled, buy some coffee beans, set back your morning alarm and brew your own morning cup o’ joe. Horrified that you spent $250 going out to lunch (that’s $12.50 per work day)? Pack your own lunch at home. On the other hand, going out to eat with your co-workers may be an important part of the office routine. That’s fine too; you can find a cheaper place to eat or a cheaper entrée to order.
The point is that you can’t begin to change your habits and save money if you don’t really know where it’s going. This is the first step to understanding your finances and building a better budget. And now that you’ve built your budget, here’s some tips on how to make sure you don’t step outside it.
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Category: Budgeting
