Pop Quiz: How much money did you spend on food last month?
I’ve been blogging about money now for almost two years, and I’ve been wanting to put together a kind of distillation of all the things that I’ve learned. All these posts are the equivalent of rough drafts, so comments are welcome.
Taking a step back and thinking of what is the first step to setting yourself up for financial security, the first thing I thought of was to make a budget and make sure you spend less than you earn. But then I thought, before even doing that, I think you need to first sit back and observe your current habits. What are you spending now?
There are lots of way to do this – the simplest is to simply keep a small notebook with you or just a scrap of paper and write it all down. Another way to is to get receipts for everything and keep them in an envelope. If you use credit cards, you can use the statements to aide you.
Whichever you choose – Do this for one month and add it up. I guarantee you’ll be surprised. You’ll realize that you spent $200 on clothes, or $80 on dry cleaning. Or maybe you spend more eating out than on groceries. Or maybe your spending is exactly what you thought it was (but I doubt it).
Armed with this information, you can make a realistic budget. It’s too easy just to sit there and say “Hmm.. how about $200 a month for groceries? And $100 for eating out. That’s sounds about right.” But then you blow your budget in the first month and give up.
Is this tracking exercise a realistic Step 1? Or is it just another thing for people to stumble on and never even get to Step 2?
By Jonathan Ping | Budgeting | 10/10/06, 10:05pm