How to set up your first budgetBudgeting 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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Financial LiteracyIn May, a stringent new financial literacy law took effect in Oklahoma. It requires all high school students to pass a class on personal finance before they can graduate. Banking, taxes, investing, loans, insurance and identity theft, among other subjects, will be part of the curriculum, and the teachers will have to certify that their students comprehend them all.

Given the woefully high levels of financial illiteracy in America, making such a course standard and required in high schools might sound like a fine idea. There’s just one big risk: Those teachers could lead their students astray.

Increasing the depth at which American high schools teach personal finance — going further than simple budgeting, balancing a checkbook, compound interest and the like — opens several cans of worms. How qualified are the teachers? How will school districts fund these new courses? How are they adding these subjects to crowded curriculums?

Classes in budgeting, credit cards, compound interest and other basic personal finance skills can help prepare our children for adulthood. The problem stems from overzealous mandates. Our children — and far too often, our teachers — aren’t in a position to handle more than a cursory examination of financial topics.

The Dangers of Unqualified Teachers Teaching Financial Literacy

School districts need to certify teachers in a specific financial discipline much as they would for a math or history teacher. Or school districts should contract outside professionals.

“Teachers feel unqualified to teach financial literacy,” says Julie Heath, director of the Economics Center and economics professor in at the University of Cincinnati. “Eighty-two percent say they are not prepared to teach these concepts, even as over 90 percent of them think they need to be taught in schools.”

“Schools and districts shouldn’t place any teacher in a position to teach subject matter he or she feels unqualified to teach,” says Heath. “Shrinking budgets mean that teachers often do not get the professional development that would make them more confident to teach financial literacy.”

How well qualified to teach financial literacy, for example, is a teacher with with $50,000 in credit card debt?

“To be a teacher or a leader, you must lead and teach by example. We cannot expect someone who is in disarray with their own finances to be placed in a position of teaching someone, regardless of age, about their finances,” says Michael Minter, managing partner of Mintco Financial in Tampa, Fla. “This may be the ultimate root to a [more] serious problem in our country, the financial literacy [or lack there of] among parents and teachers.”

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