Most experts will tell you to track your expenses for a minimum for 3 months before starting a budget. Why? Because you don’t really know how much you are spending. Not only are there so many unexpected, seasonal, and yearly expenses, there is also a lot of money that you may be spending daily, without thinking about it.
However, if you need to start saving NOW, that isn’t really an option. You need a way to figure out all of the unexpected while you are working on a budget that works. This is possible! You don’t have to track your expenses before creating a budget. The trick is to track your expenses while working on a trial budget and tweak it as necessary.
First, grab 2 small notebooks. The first notebook is for tracking your daily expenses. The second one is for beginning to fine tune your budget. As you are tracking your expenses, you will be able to figure out where you money is going, and be able to create your budget accordingly.
In the first notebook, track all of your expenses. Make sure to put the date next to the purchase or bill paid. That means everything. This includes everything you pay for in cash, with a debit or credit card, or a check. If you pull out cash with your debit card, make sure not to count this money twice. Make sure to track everything, even the smallest purchases. Small purchases add up quickly. After your first month of tracking, you may be very surprised at how much money you are actually spending.
In the second notebook, start planning out your budget. Divide each page into two categories: Income and Expenses. List all of your income on the first side, even little things like recycling and money you make with apps on your phone. List as many categories as you can think of, that you spend money in, on the expense side. Rank them in order of importance, such as rent/mortgage, utilities, food, gasoline. Make sure to remember expenses that come periodically like insurance premiums, car registration, property taxes, etc. Don’t worry if you forget an expense or two, that is why you are tracking your expenses.
Analyze Your Data
After your establish categories, estimate the total you spend each month in each category. If it is a bimonthly, quarterly, or yearly expense, divide it accordingly, making sure that it is included in your monthly expenses. As the month goes on, feel free to adjust your budget. For instance, if you have budgeted $500 a month for food, and have spent $250 the first week, you may one to reevaluate your food budget. Look for categories that you can cut back in. Can you change your cell phone or cable provider? Maybe you can adjust your plans to save money. It doesn’t hurt to contact these companies and see how you can save money on their services. They want to keep you as a customer. For example, I recently changed my cell phone plan to save money, and ended up getting MORE data, rather than having to sacrifice any, for a cheaper price!
After you have figured out your monthly expenses, it is time to see how much money is left over for savings. If there isn’t any, you need to start seeing where you can start cutting costs to create one. We all need a savings. If you are still coming up short, check out my post about starting a savings with nothing. There are plenty of little ways that you can make a little extra money on the side, and grow it from there.
Once you have your budget finalized, you can download some of those cute printables from Pinterest (budget printable search on Pinterest) and start implementing your new budget! You can even find some really great budget workbooks that other bloggers have created on Pinterest and customize it to your own needs. If you are looking for one that is already prepared for you, here is a great Budget Planner (affiliate link) I found on Amazon!
It might take a few months to get it perfect, but just by tracking your expenses, it will help you save money. You will instantly be able to see where your money is going, and see where you can trim excess purchases. Prioritize your expenses. The key is to start with necessities, pay your bills first, and then decide how to spend the rest with whatever is left over. This is very important. It may be very tempting to treat yourself on payday, and that is ok, but make sure you pay your musts first.