Your Money_ The Missing Manual - J. D. Roth [23]
Even though you don't need to budget if these things are true, it's still not a bad idea to track your spending; a budget can help you see if your rosy financial situation is taking a turn for the worse.
Sticking to a Budget
There's more to budgeting than just putting numbers down on paper. Drafting your framework and setting up categories is all well and good, but it doesn't mean a hill of beans unless you adjust your behavior accordingly. Whether you stick to your budget depends on how you spend money on a daily basis. The following sections offer strategies that can increase your odds of success.
Note
It can take time to get your spending to match your budget, so be patient. It may take several months to get the kinks out. If you're struggling, change tactics: Switch from a detailed budget to a loose budget—or vice versa. And if you suffer setbacks, the list on Coping with Mistakes and Setbacks has strategies to help you cope.
Tracking Your Spending
If you struggle to stick to your budget (or struggle with money in general), it may help to track your spending. It can be a tedious process, but what you learn about your spending habits makes tracking worth the effort. Without doing this, it can be hard to know how much you've really been spending—and what you've been spending it on.
Tracking your spending demystifies money and puts you in control. You'll have a heightened awareness of your financial habits, which will let you make changes to improve your situation. By looking at the details, you'll have a better sense of your overall spending and begin to understand how your one-DVD-a-week buying habit affects other parts of you your life.
The classic book Your Money or Your Life recommends that you keep a daily money log to record your spending. This log can take any form: a pocket-sized memo book, a computer text file, a spreadsheet, personal-finance software—whatever.
Every time you get money—from a paycheck or a garage sale or by picking up change off the ground—write it down. Every time you spend money—paying bills or buying coffee or paying bus fare—write it down. Keep track of every penny that enters or leaves your life.
Note
When you track your spending, it's important not to make judgments. This activity is meant to describe your money habits, not to change them. (You probably do want to change them, but that's a different task.) So write everything down, whether you're proud of it or not.
Some transactions are easy to forget, like when you pay with cash or buy stuff online. To help you remember:
Get a receipt for everything. Make a habit of asking for receipts, and keep them in one place so you know where to find them.
Record your transactions weekly. Some people track their spending daily, but it can be hard to detect patterns when you look that closely. Besides, daily bookkeeping can be a chore. You'll probably have more success if you record your transactions weekly. A good strategy is to make it a habit—do it at the same time every Saturday morning, for example.
This process will show you your actual spending habits—which may not match what you think they are. You can then use this knowledge to fine-tune your budget and set financial goals. At the very least, you'll get a snapshot of where your money has been going.
Frequently Asked Question: How Detailed Should My Records Be?
When you first begin budgeting and tracking your spending, it's tough to know how detailed you should get. Should your budget simply include a Food category, or should you break Food into Groceries and Dining Out? Should you track produce separately? If you go to the store and buy a $3.19 bottle of shampoo and an $0.89 pack of bubblegum, should you record both as groceries?
The answer is: Track what's important to you. Remember that what gets measured gets managed. In other words, the things you track are things you'll be better able to control.
If you think you spend too much on candy, then track it. If you want to know how much you spend on beauty products, track that.