The first step in any budget: monitoring spendingJust count what you spend for 30 days. Here's howBy Gary Foreman
Dear New Frugal You,
I
am at my wit's end with my budgeting, or lack thereof. I make enough money to
pay my monthly expenses, but I am not sure where the money goes. I should have
some left -- or should at least be able to cover my expenses. But I am always in the negative with
my bills and having to pinch and scrape to make ends meet. I don't know what to
do. I need some guidance. -- Ashley
Dear Ashley,
It
sounds as if money is just slipping through your hands. The good news is that
you're in a position to stop it.
The
first thing is to figure out where your money is going. And the best way to do
that is simply to list every expense for one month.
You'll
need to include automatic payments from your checking account, automatic
payments from your credit cards and debit cards, in-person credit and debit card
transactions, online credit and debit card transactions, any checks you've
written and cash you've spent.
It's
not as difficult as it sounds. Your bank and credit and debit card statements
along with your checks will list all but the cash expenses. And, it's a simple
matter to list cash purchases on a slip of paper or in an electronic pocket
organizer or smart phone.
The
next step is to review your bank, debit card and credit card statements. Are
there any transactions that you do not recognize? Many of us are in the habit
of pulling out the plastic for every $3 purchase. We shop at convenience
stores, fast food restaurants and coffee shops. The receipts are scattered in
our cars or purses. As a result, we don't know where we've been spending our
money.
Once
you've collected all your expenses, it's time to analyze them. Some expenses
are relatively fixed -- for instance, your mortgage or rent, car payment and
insurance. There's not much you can do about them.
Other
expenses are much more under your control. Clothing, food, entertainment often
cause problems.
Review
the statements looking for patterns. Do you find a lot of activity at fast food
restaurants? Or coffee shops? Or a series of purchases made online? Maybe for a
hobby or pastime?
It
doesn't take a "CSI" team to figure out where your money is going.
You can do the investigation yourself in the comfort of your home! The patterns
you find will identify the problem.
Once
you've discovered where the problem or problems are, you'll need to develop a
plan to change your habits. Begin by considering why you're making those
purchases. Are you paying for convenience? (Think fast food.) Or status? (Are you going to Starbucks everyday?) Or is it just a habit you've developed, such as surfing eBay?
Design
a plan to overcome that problem. For instance, planning and preparing lunches
and dinners in advance will reduce the need for fast food. Blocking online
shopping sites can halt habitual shopping. Whatever the problem is, think of a
plan to overcome it.
If
you find that you still cannot seem to control your spending, there are a few
methods you can use to force the issue. You can look into getting a prepaid card where you load a certain amount of money on it and use that instead of your debit card. Put as much money as you're willing to spend for coffee each week on
the card. Any time you buy coffee, use that card to pay for it. When the card
runs out, you stop buying coffee. Yes, it could be tough if you run out of money
on day four. But you already know the alternative: scraping by at the end of
the pay period.
The
bottom line, Ashley, is that you need to make a decision to control your
spending. The steps to do that aren't too difficult for you. You can do this if
you really want to. Please send me an e-mail in a few months and share your
success story.
See related: Surviving on a bare-bones budget, Trying to cut spending? Go BIG!, Your first budget in three easy steps, How to fight frugality fatigue, Tips for smart debit card use, A guide to the new credit card statements
For more than 35 years, Gary Foreman has worked to help people get the most for their money. Prior to founding The Dollar Stretcher.com, he was a financial planner and purchasing manager. Gary began The Dollar Stretcher website and newsletters in April 1996. Today the website features more than 6,000 articles on different ways to live better for less. Gary has been interviewed by The Wall Street Journal, The Nightly Business Report, USA Today, Reader's Digest and other newspapers and magazines. Gary answers a question about a budgeting or saving issue from a CreditCards.com reader each week.
Send your question to The New Frugal You.
Published: November 11, 2010
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