It is not enough just to keep track of how you spend your money. You must control those expenditures. Thomas Jefferson kept meticulous records on every dollar he spent. He also was deeply in debt most of this life. He kept good records but he did not control his spending adequately. To control spending, which is essential to building wealth, you must create a budget and follow it.
Look at your check book or other financial records and create a budget for your discretionary and non-discretionary based on what you are spending over a period of at least six months. Use recent figures as they will be the most accurate. The ideal period is one that covers part of summer and winter, so July 1 to December 31 is good, or January 1 to June 30. This will give you a good snapshot of average expenses.
Reconcile your budget with you expenditures at least weekly at first to get a good sense of how you are spending your money. If you spend all your discretionary money by a certain date you must then stop discretionary spending until the next pay period. Through this method you will learn how much to spend each day and each week to stay on budget.
Once you have a good sense of where your money goes and you are staying on track with your budget you can reduce your comparison schedule to once or twice a month.
A budget is a planning document so it can be changed. You can reduce spending or increase it in certain areas as the need arises. Just remember you have to keep your spending below your income to avoid debt and build wealth. We will discuss that more next time.
Daniel R. Murphy
Daniel R. Murphy
Educating people for building wealth, adapting to a changing future and personal development.