Creating a Budget in 3 Easy Steps | Step One: Track Your Spending

Dollars & Sense on 03.18.11
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You'll probably think I'm weird, but I think it's fun to fill in the boxes of our expense chart. I guess writing in those tiny numbers satisfies a craving for organization. Or the need to make life understandable.

I hope you'll find it fun too, because counting cash is the best place to start if you want to start making big changes in your financial picture with a personal budget.

My husband and I track our daily spending in a printable chart (pictured) that we post on the fridge every month. As the household purchaser, I created a chart back when we first got married and I was getting the evil eye because money seemed to be flying out the door.

To make the new system work -- and prove that I wasn't ferreting away handbags -- I had to remind my husband to mark down purchases when he got home from work. After a month or so, he got hooked and started reminding me.  Now we'd never go back.

It's easy -- and I swear even fun -- to record our daily outlays.  Here are some ideas on how to do it:

For the old-fashioned:  Paper and pencil

My favorite method requires some good old arithmetic at the end of the month, but we like the simplicity of this system. No logging on or wrangling with inflexible computer systems. Plus if you create your own table you can adjust the categories to fit your life.

Try printing my daily spending chart or this monthly spending form by Buttoned Up. Or just collect receipts and then write everything down in a spiral notebook every weekend.

For the weekend budgeter:  Software and websites

In addition to tracking spending, personal finance programs have budgeting tools and features such as check-writing and importing of bank and credit card information.  iBank is an application especially designed for Mac users recommended by Samantha Sand of Let's Get Digital

Otherwise you could try a web-based system like PearBudget or Mint.com.

Either way, some people find it helpful to pair a computer-based approach with a cash notebook for recording purchases when out and about.

For the well-connected:  Smartphone apps

I'm still holding out on a smartphone, so I can't vouch for these programs, but if you have an iPhone, pennies is supposed to be a good-looking and functional app for tracking spending. SmartBudget is great if you have joint finances but still quite simple, according to Rachel Jonat of The Minimalist Mom.

The key is to find a system that works for you. Then stick with it for at least three months. This will give you enough time to get an idea of average costs.

Once you have gotten off to a good start with tracking spending, we can get to the second step of creating a budget: defining your dreams. And finally, we'll figure out a plan of attack that aligns your spending with what you really want in life.

One last thing: don't be tempted to feel guilty about what you spend. (An idea I liked from Warm and Fuzzy Budgeting by the founder of PearBudget.)  You're just gathering information, just being curious.

So go ahead and get started with those little boxed numbers. Then come back for Step Two:  Defining Your Dreams!

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