The number one SHOCKING reason most budgets fail…are you ready? Because people don’t know what they are spending in the first place!!!
***Screams in horror***
Tracking your spending is KEY in sticking to a budget and saving money.
After all, how do you know how much you are saving if you don’t know how much you are spending?
Getting used to recording your expenditures is a big step towards gaining control over your financial life.
That’s why the first step in creating a budget should be to track monthly expenses.
That’s why I created my FREE PRINTABLE Monthly Expense Tracker
You could also simply pick up a notebook and start jotting down categories like the ones listed here…but why when I have already made this awesome printable for you?
Here’s how to do it
First of all, divide spending into two major categories of expenses, which I refer to as “fixed” expenses and “flexible” expenses.
Track your FIXED EXPENSES
Fixed expenses are those expenses that you incur EVERY MONTH and that are unlikely to change (although there may be some minor fluctuation, such as those with gas and water bills).
Examples of fixed expenses would be your mortgage/rent, HOA fees, property taxes, home insurance, car payments, daycare costs, etc.
If you have printed off my worksheet, you can see the fixed expenses to the far left.
Feel free to add any additional reoccurring expenses you have in the blank spaces provided below.
You may need to include your medications, a gym membership or Netflix subscription, items like that. Simply write them into the fixed expense column.
In some instances, fixed costs may be paid in one or two lump sums each year, such as property taxes or car insurance.
To calculate monthly cost, take the amount that you typically pay (let’s say, $300 for 6 months) and divide the cost by the number of months it covers.
Thus: $300/6 months = $50/month
Therefore, for this example you would write “50” in the fixed cost column for car insurance (I wish my car insurance was that much *cries*).
YOU WILL ONLY ENTER ONE VALUE FOR FIXED EXPENSES.
Items such as gas and electric are fixed, but might fluctuate by a small amount from one month to the next. Record the most recent month; once you really start paying attention and recording your spending, you can average over time.
Track your FLEXIBLE EXPENSES
Flexible expenses are those that we control the amount (at least to some degree) of spending each month.
Obviously you NEED to eat…but what choices of groceries to buy, eating out versus eating at home, etc. will impact and affect these categories.
The categories in top right table include:
- Grocery: purchasing food for home
- Transportation: gas, tolls, car maintenance, oil, fines, parking tickets, etc
- Dining: eating out for lunch or dinner
- Shopping: furniture, clothing, gifts, etc
- Miscellaneous: other (for me, I include things like haircuts, decor, holiday, etc.)
- Blank: fill in your own categories to track, such as Baby, Books, Entertainment, Alcohol, etc
YOU WILL ENTER MULTIPLE NUMBERS IN THE VERTICAL CATEGORIES UNDER EACH “FLEXIBLE EXPENSE”.
For 30 days, you are going to track EVERY SINGLE PENNY you spend.
You need to be totally honest about what you are spending, even if it’s only something like $1.50 for parking or a $2.00 coffee…and using a credit card counts too!
This is real money we are talking about people! Save every receipt.
Once you get home, you can enter each expense into its appropriate category.
So each time you eat lunch at Subway during the week, you will be writing in one box under “Dining”.
You may fill up some columns faster than others, and that’s okay.
If you have a receipt that includes more than one category (for example, you went to the grocery store but also bought diapers), try to divide those between their respective categories.
So I would take the price of the diapers, add that to the BABY column, and put the remaining cost minus the cost of diapers under GROCERY.
I don’t get too picky and try to separate the tax for each, just subtract lesser piece from the total.
CALCULATE YOUR EXPENSES
At the end of thirty days, sit down with a calculator and your Monthly Expense Tracker and tally up your spending in each category.
Add all the vertical numbers in Grocery, then Transportation, and so on.
Once you are done, you will now know how much money you spent that month in each category.
You may be shocked (I know I was the first time I looked at how much our family spends on groceries).
Congratulate yourself; you have just taken your first step to taking control of your budget!
However, while this is an accurate record of your expenditures, you SHOULD NOT consider this your budget.
It is very likely that you have overspent in some areas…my next budgeting blog post tackles how to “trim the fat” from your spending and write a realistic budget that will help you start SAVING MONEY!
I hope that you found this post helpful!
Next post is going to be all about creating a budget that empowers you and allows you to take control and save, save, SAVE! (UPDATE: that post is now live!)