A recent Gallup poll found that only 32% of those surveyed follow a detailed written budget. I would suspect that of those other two-thirds who don’t budget, many know they should be. But budgeting can be a little overwhelming when you first start.
Part of the problem is if we have not been tracking spending, we really have no idea of how much to allocate for some items. Some categories are easy. It isn’t too hard to figure out how much to budget for our mortgage or rent, but there are many other categories that aren’t nearly so obvious.
- How much did you spend on groceries last month?
- How much did it cost to keep gasoline in your vehicles?
- What did you spend on eating out?
Categories like these can be a lot more difficult to evaluate.
You can’t improve what you don’t track
One solution to this is to track your spending. A good place to start is is to simply write down every penny you spend for a month or two.
But that can be a little daunting too. Do I really have to record everything I spend? Sounds like a lot of work. (Actually, it really isn’t compared to the freedom and benefit of knowing where your money is going.)
September challenge: pick a category
If you are one of those 68% that doesn’t currently budget and you don’t really know where to start, here is my September challenge to you.
Pick one category of spending. It can be any category. It could be food, a hobby, entertainment, etc.
You can define it as narrowly as you want. Preferably though, it should be a category where you have some control over what you spend.
Maybe it is groceries, maybe it’s eating out, maybe eating lunch out with the work friends, maybe it’s money spent on the vending machines at work. You can decide to be as specific as you want, but it should still be broad enough to be meaningful.
Now for the month of September track everything you spend in that category. Just make sure you are honest. No cheating. And since we are only doing one category you need to make sure you track every penny spent.
Making the effort worth it
At the end of the month total up how much you have spent. Multiply that by 12 to get an idea of how much you are spending a year.
Suppose you spent $150 on lunches with co-workers. That’s $1,800 a year! If you could cut that in half, that’s $900 a year that you could be using to pay down debt or add to your savings.
Now that you have that information, brainstorm 3 ideas you could try next month to reduce that expense.
They say the best way to eat an elephant is one bite at a time. If you really want to make a change in your finances, you must have a plan. If the thought of budgeting is too overwhelming, try budgeting one category at a time.