The Most Important Budgeting Tip You Are Forgetting

by Hank Coleman

The Most Important Budgeting Tip You Are ForgettingBudgeting 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% 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  budget equation we struggle with. And that’s why you have to be vigilant.

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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 “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.

How do you categorize your spending in your budgeting? Do you use the envelope system? Many financial experts recommend putting a set amount of cash in categorized envelopes at the beginning of each month. Then you spend the money from the envelopes.

An empty envelope forces you to stop spending in a category. You can prioritize and visualize how much you are spending on separate expenses of your family’s life with this system.

“Understanding what you spend and where you spend it is the most important step to setting up a family budget,” says Matthew Moore, founder of the Clear Retirement Group. “Most people don’t track where their money goes. By categorizing your spending or allocating to envelopes, you put a system in place that holds the family accountable to their long-term goal.”

Check out these other budgeting tips that you should consider. Be sure to check out the complete article on AOL Daily Finance.

Note: This article has been reprinted with permission.

The Most Important Budgeting Tip You Are Forgetting

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]

Hank Coleman has written 581 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

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{ 3 comments… read them below or add one }


You have brought up a really fantastic point. It’s very useful and helpful. Thank you for sharing your article which is The Most Important Budgeting Tip You Are Forgetting. Great!


Joseph Hogue

True. My wife and I really keep an eye on all of our expenses, this way we see where our money goes. It’s really an eye-opener and makes you think, “Did we really need to buy that?”



How true here! My wife and I found ourselves ‘totally’ surprised when we literally tracked everything for one month. It’s one of the best budgeting tools for anyone – just prepare to be shocked. Now however, we’re keenly aware while making those “thoughtless” purchases.

Good stuff here!!


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