Creating a Budget: Tracking Expenses
Are you currently using a budget? Have you ever used a budget? Does the word budget scare you? Honestly, some people are so intimidated by the word itself that they steer clear of ever creating a spending plan.
If you have never created a budget or it has been awhile since you last used one on a regular basis, now is the time to start. The act of developing and implementing a budget is like opening a map that will lead you down the path towards financial independence.
Often times, people think of a budget and become overwhelmed with the idea of creating one from scratch as they want to jump into the process by simply listing their income and their outgoing expenses. The problem with this approach is that many people really do not know where all of their money is being spent. One strategy is to break the process down into manageable steps and build your budget one step at a time.
The first step in the process of creating a budget is to track your expenses, including expenses as little as that pack of gum from the office vending machine. You may find it helpful to find a pocket-sized notebook and pen, as you will want a convenient method of recording each expenditure. The accuracy of this process will have quite an impact on the creation of your budget so it is recommended that you track your expenses for a minimum of 30 days.
Once you have been tracking your expenses for at least 30 days, you will have a clear picture of exactly where all of your money is going on a monthly basis. Also, you will likely have some shocking revelations during this process such as how much money is spent on a daily newspaper or a bagel on the way to the office. Unfortunately, it is usually these small, daily purchases that fall through the cracks and are often the reason people feel so strapped on a monthly basis.
With a better understanding of where your money is being spent, it will ease the remainder of the budget creation process and likely result in a more successful budget.