Budget Builder Tip #1: Be Realistic About Your Spending

There is nothing about effective budgeting that is rocket science. You don’t need an accountant or a financial advisor to help you get on track. All you need is some time, your bills a piece of paper and a pencil. Sure, you can get more fancy than that if you like but for very basic budgeting, that’s all you need.

Let’s get started with out first tip of the week: BE REALISTIC ABOUT YOUR SPENDING

What this means is that you have to write EVERYTHING down. All money in and money out. There is no point of creating a budget that isn’t based on what is actually happening in your house. An easy trap to fall into is to budget for only what you WANT to spend in a certain area.

Groceries are a good example. It’s all well and good to say you are going to only spend $100 a week on food but is that really realistic when you have three teenage boys at your house? Not only will you feel badly every week that you spent more than you wanted, you will be borrowing money from other parts of your budget to compensate. See how that is a no win situation for you?

The first step of our week-long budget series is to work out how much you are ACTUALLY SPENDING. It might be a little bit painful or even embarrassing to discover how much you spend at McDonalds or at the movie theatre in a month but it’s important to do it anyway. It’s worth it in the end.

Your assignment for today is to find receipts and bills for the last 2-6 months and make a list of all your expenditures. That includes everything. Cable, gas, restaurants, toothpaste, your child’s soccer fees; everything. If you don’t have receipts for smaller items, take a walk around your house and try to remember how much items cost and when you purchased them.

All you need to do at the moment is take a piece of paper (or open a new Excel document) make headings for each month and write down your expenses under these headings. The further back you are able to go, the better idea you’ll have of your average expenses. Aim for at least two months although six is ideal.

It doesn’t matter what order you write them down in but if you are able to broadly categorize while you’re collecting everything, you save yourself more work later in the week.

Be sure to tune in tomorrow for Budget Builder Tip #2: Trimming The Fat!