On this journey to financial freedom, I am not starting with a budget. I’ve done that already. My budget plans have lived on scraps of paper, Word documents, e-mails addressed to myself and little books I designated as my books of money. They have never lasted more than two weeks.
The problem was not that I couldn’t stick to a budget. The problem was that I drafted them blindly. I never tracked my spending so I could not accurately gauge how much I would need to spend on food, transportation or entertainment. Instead, I guesstimated how much I would spend on each category and I was usually wrong. It was like signing up for a marathon before I knew how long I could run.
It turned out I couldn’t make it around the block. I would often spend over what my budget allowed. Instead of being realistic, I wrote optimistic budgets that failed to account for birthday gifts, spur-of-the-moment concert tickets or dry cleaning. When I consistently overspent, I was discouraged and quickly abandoned the budget.
This has gone on for years. I’m ashamed to admit that it’s only now that I’ve begun to track my money. To some, it seems simple enough. To others, it may be a dreadful chore. But when it comes down to it, how can you save money if you don’t know where it goes?
I now keep my track of all my spending. From the $60 bar tab to the to $1.50 coffee, I’ve recorded all transactions from the past week. So far, I’ve found it to not only be a great way to see where my money is going, but to reign in spending. I’ve only been doing it for a week and a half, but I’ve already determined that I’ve spent too much money parking and entertainment. Perhaps it’s a little obsessive of me, but I have to admit, knowing where I’ve spent each penny is empowering. Dare I say, it’s even a little fun..
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June 25, 2008 at 10:54 am
DAvid
Yes, Budgeting is a fool’s game if you haven’t got a handle on your expenses. Few of the info sources speak about gathering such information before creating a budget — all seem to feel everyone knows what they spend.
Congrats on working towards a solution.
DAVid
June 27, 2008 at 9:19 pm
Eero
When I first started budgeting, I was inspired by a book, “Get a Financial Life: Personal Finance in your Twenties and Thirties” by Beth Kobliner. After tracking my expenses for one month like you are doing now, I ended the month with $400 in the bank instead of $40—just from paying attention to what I spent!
Sounds like you have a good start.
June 30, 2008 at 1:04 pm
andreachiu
DAVid, I agree. It seems like a simple step, but I think people (more than we think) have no idea what they actually spend their money on every month. I’ve been recording my expenses for almost three weeks and I’m surprised (at times appalled) at my spending.
Thanks for the book suggestion, Eero! I’ll see if I can get that from the library later this week.
July 2, 2008 at 11:21 am
MarkO
That’s great. I think just by monitoring where every little penny goes, you soon find out that everyone is out to take your money away from you. Once I realized that people were stealing my money, I stopped spending as much cause I didn’t want to give them (the grocery store, movie theater, THE MAN, etc) any more of my money and naturally I spent less.
July 10, 2008 at 1:08 pm
The importance of recording your spending « Unspending
[...] even I’ve been surprised by how much more conscious of my spending I’ve become since recording where my pennies go. I’ve still got about a week of recording my expenses before I create a proper budget. [...]