phase one keep track continued

In this post I’ll continue to talk about setting up your ledger. Then we’ll start to develop a budget.

At this point you have your ledger set up with expenditure categories across the top of the columns, saving the last column for daily totals. You have transferred your figures from the last 30 days so that they appear in the appropriate column on a line corresponding to the correct date. You may have already entered daily totals in that last column. If not, do so now. Also, total each column and enter the figure in the last row across or in the bottom margin below its appropriate category column.

Add the figures you have across the bottom of your columns. Write that sum at the bottom right hand corner of the ledger page. Now, add together the figures in your total column. That sum should match the figure you noted in the bottom right hand corner of the page. (If it doesn’t match, you’ve made a simple addition error and just need to redo this step.) This figure, this total of totals is the amount of money you paid out during your period of recording. How does it line up with your incoming funds?

If you did not out spend your income—congratulations! (You may still want to make some budget adjustments, so you can make any debt payoffs quicker or save more money.) If you spent more than you had coming in, you may have a real need to make some changes.

If you experienced a financial short-fall, there are a couple of things to consider immediately: One, if you followed the instructions I gave you in Phase 1, you recorded all expenditures as cash. —Think about what you actually put on your credit card(s). Does that account for a significant percent of the over spending? It does for many people. That’s why I had you record those transactions as cash; you need to be conscious of the damage credit cards can do. Also, it is possible that you don’t have enough income. You need to be careful in coming to this conclusion. Many people want to say they that when it is really spending habits that are the problem.

This is a good time to examine how you spend your money. That a significant factor in preparing your budget. Look for waste and extravagance. For example: I used to drink several sodas a day. When I began developing a budget I started buying soda in bulk and carrying my daily supply to work. I decided I would not continue to pay a premium price for them individually. As my budget evolved, I realized I what I really needed was something to drink several time a day, not particularly sodas. Don’t get me wrong, I do enjoy soda, but it was just a habit to drink so many. I still buy soda in bulk for the price break, but I only take one a day with me to work. My office supplies coffee (for free) and there is, always, the water fountain. Now, my soda is a refreshing perk to be indulged when I need it most. Here’s the important point of all this—the money this adjustment saves me on a daily basis is negligible, but over the course of a year it is huge! And please note, I still get to have this “thing” I enjoy. I also get to have more control over my money; I get to tell it some of it to do something more significant than to “buy me sodas.”

Your challenge is to find similar places in your spending habits. Here are a few ideas:

1) How much did you drive this week? Could you have walked or taken Mass

Transportation to save a couple of dollars?

2) If you smoke, maybe you should quit. (That was another major savings for

me.)

3) How many movies do you usually rent? Do you already pay for cable?

Maybe, you could take more advantage of your TV service?

4) Do you dine out a lot? Think about turning meal preparation at home into

family time or a social gathering.

I’m sure as you look over your expenses you’ll get ideas that will work for you. Do remember as you peruse your categories for places to make saving cuts, that “cutting” does not necessarily mean total elimination. One goal of budgeting and the control it gives you is enjoyment of life, but that’s hard to do if you are constantly fighting debt or an insecure future.

Get a piece of paper you can use as a work sheet. Make a list of your categories and how much you wish to spend in each. (This may have to be governed by minimum payments in some cases.) You now have a basic budget. I mentioned above that my budget “evolved”. It still is a work in progress and yours will be too; it will have to fit your circumstances—either you will make changes or your budget will. Here is the place for me to note that if you truly do not make enough money, then a second job may be a very real part of you budgeting solution, but do look at spending adjustments first.

Continue to carry your little notebook. Keep your records accurate. Make entries in your ledger daily. If you think you are going to over spend in a category try to make changes in your lifestyle that will keep that from happening. Your budget will evolve over time. It is a natural part of the budgeting process. In fact, in my next post I’ll handle some topics that may have you inclined to make some adjustments soon.