Although few will admit it most people who do not follow a budget have a poor grasp on their spending habits. They have very little insight into the reality of their spending patterns and, therefore, needlessly waste a lot of money. Even people who are reasonably responsible with their purchases are often surprised to discover areas in which they are overspending when they take a closer look.The first step to fixing your family financial problems is to track and log all spending over the course of a full month. This will provide you with raw, real data about how your money is being spent. Merely listing your your bills and major expenses is not adequate because this does not account for much of your net spendable income that can be better utilized.
For those who use debit cards exclusively tracking spending is pretty easy to do because every transaction will appear in their bank statements or online banking program. But, it is critical that all spending with cash, checks, credit cards, and other means is also tracked closely and logged daily. It is important that you log not only the amount being spent but also a brief description of each transaction (e.g. $7.35 - McDonalds, $96.00 - car insurance, $5.65 - Starbucks, $73.20 - grocery, $43.00 - gas).
Use whatever method works best for you to record your transactions. Some options include a spreadsheet or other computer program, a smart phone application, or even just a simple paper list. There are many different methods to choose from, and many resources can be found free online. If you want to go the tech-savvy route, check out Mint.com (an awesome, free service) and connect to your online banking. If you want an easier and more traditional solution download and print a "30 Day Diary" (PDF) from Crown.org (a great organization with many free resources).
The absolutely critical piece to tracking your spending is to include literally every penny that is spent. Seemingly insignificant purchases can add up to a considerable amount quickly. This is especially true when you consider that both you and your spouse together are making dozens or more of such transactions a month. Sit down each evening (preferably together with your spouse) and make sure you have logged every single purchase for the entire day. Don't allow yourself get behind. Stay motivated and be consistent. This step is only necessary for one month.
Articles in this series...
--- Introduction
(1) Track all spending daily for a month
(2) Organize spending into meaningful categories
(3) Analyze your spending
(4) Establish a spending plan (budget)
(5) Work your plan
