This is Part One of my five-part, eight-week series on The Beginner’s Guide To Budgeting.
If starting a budget seems overwhelming, let’s go old school for a moment, shall we.
1. Get out a sheet of paper and a pen or pencil.
2. Now write down EVERY amount you spend as soon as you can after you spend it, for an entire month and what you spent it on. Every. Single. Penny.
That’s it. The first step towards budgeting your money is to track every cent that leaves your bank account/wallet.
You will have entries for your mortgage/housing, insurance, auto payment, etc. I call those Fixed Monthly Bills (FMB) those that are due every month like clockwork. And then you will also have entries for things you need to purchase every month, you know, like food to eat and Kleenex to blow your nose with, that stuff. Those are referred to as Fixed Monthly Expenses (FME). And then if you are like me, you will have the things that I like to call FLUFF, better know as: Fun Life purchases Under False Finances – those impulse items, things you don’t-really-need-and-I-really-can’t-afford-them-but-I-really-want-it-and-it’s-going-on-the-credit-card-so-I-don’t-have-to-pay-until-later-anyway so you go ahead and buy them. Anyway. Yeah, those things.
It can be hard to change your lifestyle and habits in one week so this whole process is going to take place over a couple of months. This one step will take a whole month. This will allow you examine where your money is going and what it is doing for a full month. This is a process and the first step is awareness. And you probably think December is a really bad time to start something like this but I actually think its the perfect time because that is when most of us overspend blissfully and gleefully unaware of where our money is going.
I’ve even created a worksheet for you to use (because I ♥ spreadsheets) so if you would like to keep everything organized and in one place here you go (hint: it will make Part Two a little easier).
If you run out of room go ahead and print another one, they’re free!
But of course, if it is easier to just save up receipts in a folder or envelope then have at it. I just want you to keep track of every cent you spend for an entire month: on groceries, on coffee, at the gas pump, with your credit card, on gifts for others, on a pack of gum, that parking meter with the change in your pocket, on gifts for yourself, every bill you pay….EVERY. THING.
Meet you back here in a month with that list, or in between worksheet entries, you can keep checking back here for more fun things NOT finance related, like maybe food or house projects!
Next up – Part Two: The Big Picture