Money Q&A

Budgeting isn’t easy. Many people feel overwhelmed and give up before they even get going. But even among those people who don’t quit, many miss the most critical step when creating the family budget: tracking all of your expenses. And I mean down to the penny.

According to Gallup’s annual economy and personal finance survey, only 32 percent of American households prepare a written budget or use software for a spending plan.

There are only two sides to a budget: income and expenses. Most American workers receive a pay stub that lays out exactly how much they earn. Of course, for those on commission, small-business owners and others, income fluctuates from month to month. But the majority of us have steady wages. There may not be enough money coming in, but that’s a separate issue.

Do You Lose Track of Cash?

It’s the spending side of the equation we struggle with. And that’s why you have to be vigilant.

It’s easy to lose track of cash, for example. That’s one reason that my wife and I use a credit card to budget with each month and track spending. Cash has a way of leaking out of your pocket. You don’t remember where it went, and it’s easy to toss or misplace receipts.

“Tracking every penny of expenditures with receipts and income is the first step to gaining control of your finances,” says Eric Wentworth, author “A Plan for Life: The 21st Century Guide to Success in Wealth.” “Money leaks are nearly invisible, but can ruin any attempt to get control of your finances.”

Dave Ramsey is famous for saying that every dollar of income must have a name. Families must assign every dollar in the budget a purpose at the beginning of the month. At first, families often find it burdensome to track spending that closely. But start by committing to do it for just one week.

Keep a notebook with you and write it down every time you spend cash, along with the place, and item category. Save your receipts. Odds are, after you get the hang of it, you’ll find it’s not too hard keep at it for another week, or two or three. Tracking your spending will soon start to become second nature.

Track Expenses Like You Track Calories

“If you want a successful budget, you have to be honest with yourself and figure out where all of your money is going,” says Glen Craig, author of the popular personal finance blog FreeFromBroke.com. “Too often we list out most items, but we don’t take it serious enough to find everything. And then the budget never has a chance to work.”

You will have no idea how much your family is spending every month until you keep track. Like counting calories, we focus on what we count. It has our attention. When we write the money spent or calories eaten in a journal, it helps us to visualize, monitor and change behavior.
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