Welcome to Day 18 of Where’s My Money Going? Month! This February 2009, I’m challenging readers (and myself) to track spending manually for 28 days. Don’t worry if you’re late to the party, you’re still welcome to join. Consider tracking your spending into March.
Why start with tracking spending instead of creating a budget and working just from that? One commenter suggested that a budget would be a better first step, more likely to attract “free spirits” than tracking for a month before they could get started. That’s not a bad suggestion, but while I think that the two are inextricably linked, I see a value to focusing on spending (just for a month) which one can’t get from budgeting. By seeing precisely what you’re spending on, not just the categories, you can build a better budget.
After all, when you create a budget, you have to have some idea of what costs are. For example, the same groceries here in DC cost more than in Delaware. I could just get the figures from the last 6 months spending at grocery stores and budget a mean, or I could come up with a number I want to spend and do my best to hit that.
But I think both approaches are missing the specifics that I hope you’re noticing (as I am) when tracking your spending each day.
There’s no harm in creating a basic budget at the beginning based on what you think you can/should spend. Even as I’m tracking my spending this month, I’ve got a budget set up. That helps me plan spending for the rest of the month, it’s a great tool. I’m just not focusing on it.
At the end of the month, I’ll be talking about how to convert what you’ve gathered into a budget that’s right for you. There’s nothing wrong with using a budget during this month, especially if you’re worried about overspending. I like seeing how much I have left in each category and making spending plans accordingly.
But if you haven’t tracked your spending at least in a broad way, any budget you create will probably need a great deal of revisions. After this month, you’ll have an idea of the spending habits you want to change and a much better sense of how much is reasonable in each budget category. If you need to cut back, you may even be able to find some specifics to give up (depending on how detailed your spending log is).
So hang in there if you feel like giving up before the last third of Where’s My Money Going? Month. The data you’re gathering now is more valuable than mere historical data because a) you’re thinking about it closer to the time of purchases and b) you probably have more specifics to use later. Once you’ve collected this info, you can shape a better budget!
I’d love to hear what you’re learning about your spending habits that’ll affect future budgets!
The YNAB coupon code is still active, it’s mrsmicah and you can enter it on checkout for a 10% discount. More information on the coupon code and giveaway.
This post was part of Where’s My Money Going? Month.