Finding the Money Leaks

A lot of people ask why it is important to have a budget and track their spending. They think they do alright and have a general idea of where their money is going each month. To be truly effective financially though, a budget is a necessity. Let’s say we sit down together and have you write out a list of your monthly expenses. You write down $200 for groceries each month. We total that up with everything else, and it looks like you have enough money to cover your budget, but somehow you are ending up behind each month.

Suppose you follow my advice and track every penny you spend over the next few months. As soon as you spend any money, you write it down so you know exactly where it goes. You come back the next month, and we look over your budget together and see that you actually spend closer to $400 on groceries. This isn’t necessarily a bad thing. Maybe you need to look for ways to save on your grocery bill, but maybe you don’t. Perhaps there is another area that you can cut back so you have enough to cover the grocery line item in your budget. The idea is that the process helps you figure out where the spending leaks are, where there is money flowing out that you did not realize. The more solid idea you have about where every penny is going, the better you will be able to control the flow. It is like having leaks in a dam. You can’t stop them and save the whole dam from breaking if you don’t know where they are. With a budget and tracking system, you are able to prioritize and visualize your finances.

Budget does not equal poor. And it doesn’t mean you are stingy with your money. There is a lot of stigma about budgeting. But did you realize that even large, successful corporations have very detailed budgets? They keep track of every penny. And they are profiting. So don’t worry about what other people will think when they discover that you keep a budget. Know that you are doing what is best for you and your family, getting your finances to a great place.

Is it enough to learn how to track your spending and have a budget? If it were, all those fast and easy budget books out there would be helping people. They would not have to jump from one to another trying to find something that actually works. We take finances from a different angle. Besides budgeting, we feel that it is important to view the whole picture, to see how the rest of your life affects and is affected by finances so that you can be successful in making changes.

Tags: budget, spending leaks, tracking