Noticing Your Trends (Or Setting Yourself On Fire)

For the past week or so we have been discussing the use of budgeting as a tool for you financial health.  Using a budget lets you not only track what you earn and what you spend, but then to make the most of every one of your dollars.  A budget doesn’t have to be anything fancy; merely a list of what you make, what you spend, and what you save is plenty!

I’ll be the first to admit that keeping your budget and expense log current is not the most exciting thing to do.  In fact, I think setting your hand on fire might be more fun – but far less beneficial in the long run!  So keep at it; yes, it is slow and tough and a real pain, but the rewards are well worth it, and eventually you’ll get to the point where you only need to do it once a year or so.

Once you combine your expense log with your budget, you can easily see where your money is being spent compared to where you intended to spend it.  This is the true value of your budget – you find out three key pieces of information.

1.  What you expected to be spending.

2.  How much you actually spent.

3.  What you spent it on.

By learning this information, you can start to track yourself.  You may notice trends in some areas – electricity and heating expenses are lower at some times of year than others.  Food costs (grocery vs. dining out) are roughly inversely related.  These are where you need to pay attention – the relationships between your habits and your spending!

Now change your predictions for the next month based on this.  What do you think you are going to spend, based on your history?  Is it more than you can afford, or want to spend in a certain area?

Say, for example, you just realized that you on average spend about $700 a month on food – far more than you’d like.  Why not now set a goal to spend less next month?  Use your trends to determine the best ways to save money.

Tags: Budgeting, expense log, finances, food, goals, long term, necessary, setting goals, The Expense Grid