Expert Q&A

The first step in any budget: monitoring spending


If the money always runs out before your payday, the first thing to do is find out where it’s going. Here are tips for that crucial first budgeting step

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Question for the expert

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

Answer for the expert

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: 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

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