By Terry Rigg
Most of us don't have a clue how much money we spend and what we spend it on. We spend it until it's gone and hopefully we can find some more to spend.
The conventional wisdom is that, if you want to know the details of where your money goes, you keep track of every penny in some sort of ledger. This is by far the most effective way to handle this problem.
By keeping track of your purchases you will be able to make decisions that could reduce your expenses. You can cut out unnecessary expenses and put your money toward more important things.
It is best to keep the ledger with you and write down this information as you make the purchase. Naturally, if you have a family they will also have to do the same thing.
Like I said this is a fantastic way to know where your money is going. The problem is that most people don't stick to it for more than a few days.
AN ALTERNATIVE
Keeping tract of your money is a means toward a goal. You want to control your spending so that you can buy the things you need and some of the things you want. It's as simple as that.
Since you already know what your regular bills are going to be each month, the only thing you need to keep up with is your Household Expenses. This includes a lot of things like groceries, car gas, clothes, etc. In order to do this you will need to know how much money you have to use for this purpose.
The
Budget Worksheet available at Budget Stretcher will allow you to "brainstorm" your expenses to determine what you need to spend your money on each month.
Here is how it works:
First, you sit down and try to think of everything you spend money on and write it down. If you have a family it's best to get them involved in this process. You won't be able to think of everything at first but you will get a good idea.
Next apply an estimated dollar amount to each of these expenses. Here again you are guessing. You have to be as realistic as possible.
Now that you have an estimate of what you spend on your Household Expenses each month you need to see if you have enough money to cover it. To do this you simply total your regular bills and savings and deduct it from your net income.
If you don't have the money to cover your estimated expenses, it's time to start cutting back. Look at each expense and try to find ways to reduce or eliminate it. For example, if you are visiting the beauty shop twice a month change it to once a month.
If you have a family your next problem is going to be how to sort your money. When you have your list of expenses you will need to assign the responsibility for each of those expenses to a member of the family.
I wrote another article that explains this process in detail and provides specific examples of how to sort your money. You can see this article by
clicking here
As with anything else you will need to make adjustments. Even if you decide to keep a ledger to track your expenses circumstances change and you will need to adjust these figures as well.
Knowing how much you spend is important, however, it is not as important as having the money to cover your expenses. If you have what it takes to keep track of every penny you spend I would recommend that you do this for a couple of months and use these figures to help you set up your household budget.
If you have tried using a ledger and find that it's just to difficult I would use the method I've just covered.
The main reason budgets don't work is that they are just too hard to keep up with. By setting up your budget to be as simple as possible you are increasing your chances of making it work.
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Terry Rigg is the author of
Living Within Your Means - The Easy Way and editor of
The FREE Budget Stretcher Newsletter and Budget Stretcher web site. He has 25 years of experience counseling individuals and families concerning their personal finances.
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