I've always been a fan of math, numbers, and organization, but I know that isn't the case for everyone. My super basic budgeting method should be easily adaptable to anyone who may be interested in a similar venture (or is just curious about where exactly their money is going).
I enroll in paperless statements from my bank, but for budget's sake I went online and printed out the last three months. I also referred to credit card statements for the same time frame. I don't typically carry or spend a lot of cash, so those who work for tips or do other cash-based work would have to incorporate an additional method of tracking cash flow. I also have the same monthly income, though I know other jobs tend to fluctuate and would need to be averaged for this approach.
First, I went through and highlighted every mortgage payment. That was easy; it's only once a month and it's the same number each time. Next, I highlighted each energy bill. These were also monthly but slightly differed in amount, so I did some basic addition and division to find the mean (average) cost. I did the same for internet bills, water/sewer utilities, medical expenses, my Netflix subscription, and car insurance.
I found all transactions in that quarterly period used to purchase fuel for my car, added them together, and divided them by three to find the average amount of spending on gas per month. I followed the same method for groceries, household items, dining expenses, drinks, gifts, clothing, entertainment, and miscellaneous shopping.
Finally, I totaled up the average spending in each category (remember, this is just simple math, people!), and didn't like what I saw. The final tally was way too high. I was spending enough to break even, or sometimes more. Where could I cut back? Certain expenses are far more necessary than others. I decided to put the mandatory expenses like in my budget as is. Certain categories, like dining expenses, could be eliminated entirely. I did not include those in my budget. Then there were tricky items, like groceries and gas. Yes, I need them, but at one point am I spending much more than I really need to? For these categories, I did the super scientific thing and guessed.
I can easily spend upwards of $200 per month on groceries. As a single lady. Yep. I love to cook and experiment with a variety of ingredients. I'm certainly not at a loss when I open my freezer and cabinets. Though I could have gone easy on myself and allowed for a reasonable amount towards food, I instead decided to present this as what it should be: a challenge.
I love fresh produce, and usually have to pick up fruits and vegetables and salad greens on a weekly basis. Granted, one could live for a month off of boxed macaroni and cheese and oatmeal and require very little in the grocery budget, but where is the balanced diet in all of that? That lifestyle worked when I was a college student, but I had no energy eating that way (and I also put on twenty pounds). How can I eat as fresh and wholesome as possible without breaking my spending fast?
The key for me will be my freezer. I have plenty of bags of frozen fruits and veggies stuffed in there. It won't be the same as a handful of fresh blueberries in the morning or a bright green salad for lunch, but my $20 allotment should help stretch that. By the end of the month I will likely have an empty freezer but should have been able to stick to a balanced meal plan. There are also added benefits to forcing myself to creatively use every ingredient in my house, such as saving money due to waste reduction, but that's for another post.
Do you keep a budget? How do you track your spending? How effective do you think it is? Any suggestions for keeping a budget?
Up next: The Spending Fast begins.