Years ago, I worked as a program accountant for the Florida State Department of Education and as the business manager of a community mental health clinic. One of my major responsibilities in both those positions was budget development and analysis. Some of the organizations I worked with were responsible for millions of dollars. It was crucial that every cent be tracked.
However, tracking after the fact was only of value if we knew where it was supposed to go in the first place.
Most people are aware at some level that they should probably have a family budget. Many are scared of it for two reasons:
1. It seems to be complicated
2. It may reveal some unpleasant facts
Well, making a budget is not that complicated. You just write down how much money you make, and then list how much you spend. Simple enough, right?
It should be. However, for many of us, we have no real idea of where our money is going.
So, here's money management step number one.
No, it is not to make a budget.
I want you to carry around a piece of paper, 3×5 card, or notebook and write down every single expenditure you make for a month. Cash, check, money order, debit card … does not matter. Even if you drop a penny on the ground in the parking lot and do not bother to pick it up, write it down. "Dropped penny … one cent".
I do not just want the amount, either, I want the date and what it was spent for: socks, coffee and donut, gym fees, tank of gas for car, and so on.
So, what are you going to do with this info?
Well, you are going to look at it. If you have a brain and any real desire to manage your money, there will almost certainly be some things that jump off the page (s) at you. That snack on the way to work, for example, could be costing you $ 50 a month! Fifty bucks could be put to a lot better use perhaps.
I can not make these choices for you. I can only show you the method by which you acquire the data to make decisions.
Once you have done this step, let's move to step number two.
Each day, when you leave the house, have a shopping list with you.
Some days, that list may only say something like:
Coffee $ 1
Gas $ 15
Some days, you may actually have a real shopping list … like a grocery list which you have prepared BEFORE you get to the supermarket.
Now, only spend the money or purchase the items that are on that list.
I mean it!
You said you were only going to spend $ 1 for coffee. Do not throw in a donut.
You forgot to put flour on the grocery list! Use flour to start your next shopping list.
Oh sure, things will happen that just have to be deal with. You will certainly NOT plan to get a flat tire or to have to stay at work for several hours and buy dinner. However, on a day-to-day basis, you can pretty much stick to your list.
With time and experience, you can even learn how to be prepared for some of life's little emergencies, such as having a little money set aside just in case you need emergency roadside service.
Oh yeah, that's budgeting.
Oh well, once you've done steps one and two, step three, making and sticking to a budget, will seem pretty easy.