So you’ve made a budget of your very own. That’s super! Now you just have to keep yourself from buying every awesome thing you see with complete disregard to how much money you’ve budgeted for awesome things. Here’s what you have to do:
Track your spending!
I know, it’s a sooo much work and you don’t have time in your busy day to write down everything penny you spend. At least that’s what I tell myself. But the best way to follow a budget is to know what you’re spending money on. You may have given yourself $200 a month for food, but if you spend $250 on average, you need to adjust your budget or you’ll come up short at the end of the month. By tracking spending you can get an accurate idea of how much you actually spend.
Writing these posts has inspired me to make the effort to keep track of what I spend. I’ve got a spreadsheet in my Google Docs where I write down what I spend each day. This works for me because I can access it anywhere with a computer and internet connection. I’ve also had some success making a giant pile of receipts and entering them into a spreadsheet at the end of every week. Use whatever method works for you.
Track spending for at least a month, the longer the better. There are plenty of websites out there that are happy to do it for you, such as LearnVest and Mint. Excel or a pencil and paper work just as well though. Be sure to keep track of what you buy (coffee, groceries, shoes, etc.). This will help you when it comes to cutting expenses.
Once you know where you’re money is going, you can figure out what to cut out. For me, it’s buying lunch at work. It always feels like so much effort to pack a lunch in the morning and I forget in the evening. However, the $5-$8 I spend a day buying lunch adds up to a lot of money at the end of the month. Money I would rather spend buying books or fancy kitchen gadgets.
After tracking for a month, see if your spending habits line up with the budget you created. You’ll probably be surprised to see where a lot of your money is actually spent.
With your budget, you know how much you’re spending on things. Unfortunately, knowing exactly how much money you have to spend doesn’t mean you’ll spend it wisely. If you’re anything like me, you spend wildly when your paycheck first comes in leaving you broke at the end of the month.
My last job paid me weekly. It was amazing to have money coming in every 7 days. Now I get paid once a month and it’s been a struggle to control my spending at the beginning of the month. My method for handling the temptation of all that money sitting in the bank is to divide my spending money into weekly chunks. By doing my darndest to only spend a certain amount each week, I can ensure that the money’s still flowing when the end of the month comes around.
Another way to not blow all your money at once is to figure out what amount would put a significant dent in your spending and wait a couple of days before making a big purchase. If you have $200 to spend in a week, dropping $100 on a big-ticket item makes has a huge effect. Before buying that expensive item, think on it for bit to make sure you want it. Instant gratification is great, but so is having money in the bank.
You’re on your way to being a financial genius! Next week, I’ll give you the scoop on credit.