Why Tracking Spending is Good for You

Experts tell us the first step in creating a budget is to write down everything we spend.

The new year’s fresh start is a perfect time to shine a light on where our money goes.

If you’re hoping to cut down on the cost of living, knowing how much you spend and where you spend it is crucial. Once you’ve determined where you can trim expenses, it’s easier to make conscious decisions to spend less.

Personally, I find it hard to save money on groceries, but fairly easy to save on entertainment, eating out, and clothes. Reducing larger expenses like auto and housing payments (by downsizing or downgrading) is more difficult but can significantly change your financial picture.

What you do with that savings is up to you. You might use the overflow to contribute more to retirement or college accounts. Pay off debt, save up for a house, car or vacation — or all of the above. Or simply let the extra pile up for a rainy day.

One Day at a Time

Saving money often requires making sacrifices. Some find it easier to spare their time, energy or creature comforts if they establish concrete financial goals.

If we set realistic targets and we take baby steps to get there, we have a much greater shot at success. As with dieting, huge objectives taken on with a gung-ho approach are exciting at first, but have the tendency to fizzle if getting there requires a kind of starvation.

To me, being frugal is not about deprivation. It means being very careful about where my pennies go. It’s finding ways to cut spending, while trying to stay faithful to my values and enjoy life in the process. The idea is that, when the need arises, we’ll have the funds to pay for what’s important.

How to Track Spending

My husband and I have been recording our daily expenses since we got married nine years ago. We created this simple chart that we print every month and post on our refrigerator. Its prominent place reminds us to jot down the day’s outlays and both of us can participate without logging onto the computer.

At the end of the year, we tally monthly expenses to get a bigger picture with this chart.

If you’d like a more high-tech way of tracking expenses, try the free online budgeting tools at Mint.com. Recommended by Money Magazine, Mint also helps you keep tabs on all your savings and investments. Of course many people use desktop accounting software like Quicken or You Need a Budget.

The important thing is to employ a method that feels good to you and that you can keep up month after month.

So what are you waiting for? There is no better time to get on track.

Amy Suardi writes about saving money and making life better at Frugal-Mama.com