Monday, January 14, 2013
Today in my budgeting series I'm going to talk about tracking expenses. I think budgeting and tracking expenses go hand in hand because tracking my expenses helps me stay within my budget and making a realistic budget is SO MUCH easier when I have kept track of my expenses. If you want to make this a reality in your life the number one key to remember is... you have to find a simple method that works for you.
And because I like lists here is a list of all the ways (I can think of at this moment) to track your expenses.
1. Paper and pencil
2. Excel Spreadsheet
3. Software (software you buy for budgeting specifically)
4. Online tracking
5. Smartphone apps (most of which tie into an online place)
6. Cash envelopes
(I know there are many more)
To be 100% honest I haven't tried all of these methods. (Or I've tried and epically failed.) But I want to talk about my favorite expense tracking method, paper and pencil.
Paper and pencil is my tried and true expense tracking method. I feel the most at peace about my finances when I use this method. When I try a new method and realize that we don't belong together, I always go back to good old fashioned method. (Remember I am no expert, I'm simply sharing what works for me and hoping that it helps at least one person out there.)
I have a binder (I call it my budget binder) with tabbed dividers. Each divider is labeled with one of my budget categories. I have two extra divided sections, one for my checking account and one for my savings account. In the checking account and savings account sections I keep a running total of the transactions made within that account. Kind of like the check register in your checkbook. My checking account and savings account sections look exactly like my online banking transaction list. Why do I do this instead of relying on my online list? Because writing it down in my budget binder makes me acknowledge every single transaction. I am aware when checks clear, or if they haven't cleared I can follow up with them. Running the risk of over-drafting becomes very slim but there are no withdraws to my account that I forgot about (also why I have very few items that auto-withdraw.)
Now, moving on to the rest of the divided sections. Each section is labeled with a budget category. When I am setting up this system I take my checking account balance and divide it between each budget category. (Note: it is good to have a "cushion" in you checking account so leave a comfortable amount in you account that is not allocated into a budget/spending category.) When I spend money I subtract it out of its respective budget category. Every payday I take the paycheck, divide it, and enter it into each budget category according to the my budget plan which I talked about here. If I overspend in one category, I have to take it from another category. (Preferably if you overspend in a NEED category you have to take it from a WANT category.) But this is where self-control comes into play. Just as if you were using cash, you cannot spend more than you have. If you're out of money in the food/household budget then you'll have to get creative with the food in your pantry until you get paid and can fill up your food/household budget again.
It may seem like a lot to keep up with adding and subtracting items but I only do it once a week during my appointment with myself. For me it talks about a half hour to update budget binder and pay any bills for the week.
That's what works best for me and my family right now. I am always looking/trying new things to see if I will find something that will work better. Simple pencil and paper works for me, but you have to find what works best for you.
Posted by Sam V.