Today, I'd like to offer a little tip about budgeting that has really helped me.
Up until a few years ago, my pattern was as follows:
1. Realize I need to reel in spending, decide to make a budget.
2. Sit down and make rough guesses as to how much I should spend in a few main categories.
3. Go on my merry way.
4. Realize that I spend way more than my best guess, and not everything fits into the categories I listed.
5. See #1.
It was a vicious cycle that never allowed me to really improve my financial situation. Then I started doing something slightly neurotic, but life-changing (financially speaking). I began to record every single monetary transaction. (Slightly neurotic is probably and understatement, because I even recorded cash transactions and kept track of when I got money form a friend for putting dinner on my credit card. One time I found $20 in an old jacket, and I recorded that too). After a month I had a realistic picture of what I actually spend on everything. After three months, I had a three-month average. After a year I had a pretty realistic picture of the things I needed to plan for, including those sneaky once-a-year expenses like a rogue engine replacement or random trip to the ER for violent food poisoning.
I finally had the data I really needed to make a realistic budget.
If you're looking to do something similar, being neurotic really helps, but here are some other tips for accomplishing the same result:
1. Get a receipt for everything (not very eco, but useful for these purposes).
2. Use electronic forms of payment rather than cash, which is easy to lose track of.
3. Use a program to track your expenses - (Excel, Mint.com, Quicken and QuickBooks are all great programs depending on how geeky you want to get with this).
4. Set aside an hour a week to monitor and/or record your transactions. This may seem like a large investment, but if budgeting is on your to do list it's totally worthwhile.
5. Finally, at the risk of sounding overly exuberant on the matter, if you would like personal encouragement feel free to contact me. I seriously love this stuff.
More on finances.