Budgeting 101: Know Where You Are

Posted by: Jaimie on Thursday, October 23rd, 2008

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On my blog, I write a bit about budgeting.  Okay, a lot about budgeting.  I'm a wholehearted budget convert and I think it is one of the most important steps I took in gaining control over my financial destiny.  That sounds a little hokey, but it's true.  I used to just drift along and feel like money (or our lack of it) controlled me, and there was nothing I could do about it.  Now, I control the money, and I feel like we have the ability to attain anything we truly want to.  All because we took control of our money through creating and understanding a budget, instead of continuing to let it control us.

The first step in creating a budget is simple:  know where you are. That means know how much comes in every week, or month, or whatever period you base your budget on, and know what goes out.  Do you know the details of your finances?  Do you know how much you spent last month?  Do you know how much you (and your partner if applicable) brought in last month?  If you have debts, do you know what interest you pay?  If you have savings, do you know what interest it earns?

The essence of budgeting is in the details.  When I sat down to do our very first budget, I had a general idea of how much money came in each month.  A general one.  And I kind of knew how much we spent.  I know our major bills, but I really had very little idea of a total for grocery shopping, gasoline, medicine, kids activities, and a bunch of other things.  I thought I wouldn't be at all surprised by what the actual numbers were, but I was wrong.  That first tracking of our spending really opened my eyes to what was really going on.

So if you've thought about creating a budget, but never got around to it or think it might be a waste of time, give it the one month trial.  For a single month, track everything that has to do with money and your household.  Track what comes in and what goes out.  it doesn't have to be fancy - a simple pen and paper will do, but give it a whirl.  It only takes a few minutes a day or every few days to keep track, and the results might surprise you.

It is hard to be frugal with one's money if they're not sure what their money actually is.

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Topics: Frugal Money Management

3 Responses to “Budgeting 101: Know Where You Are”

Nan Says:
October 24th, 2008 at 12:19 am

I have recently decided I want to start living on a budget again. We’re pretty careful with our money but we could do better. I want to challenge myself to save more, and how can I if I don’t have a budget? So I need to get busy. When I am trying to save money (which is practically all the time, lol!) I like to challenge myself and make a game out of it. Thank you for this article!

gina Says:
October 26th, 2008 at 2:12 pm

Great minds think alike! I just posted on the same subject last week too.

 

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