Starting and Sticking to a Budget: Step 1

More than 40% of American families spend more money than they earn.  And more than 14% percent of our disposable income is spent on debt reduction these days, up from 13% in 2001. With fuel and food prices skyrocketing and the currency weakening, even "comfortable" middle-class families are feeling the pinch. What's more, less than half of all Americans use a budget, and about one in three don't know the interest rates on their credit cards, according to a survey for the National Foundation of Credit Counseling.

Despite all that gloomy news, it is possible to get out of debt and stay out of debt. How? By putting yourself on a "budget." As daunting as it may sound, making a budget is actually fairly easy. Think of it as a financial makeover—a lifestyle change that uses small steps to help you reach your goals. Sound familiar? It's the same proven system that SparkPeople's healthy living programs are based on. Just as fad diets won't help you lose weight and keep it off, a strict financial "diet" doesn't work either! Getting out of debt, saving more, and just familiarizing yourself with your financial situation takes a little planning, some patience, and perseverance.

Here are five simple steps to making a budget (and sticking to it!)

1. Keep a spending log
For one month, write down everything you spend. (Our online Spending & Saving Tracker and printable Spending Log make it easy.) Keep track of all purchases, from the $3.25 you spend on a latte, to the $175 you pay for your son's school trip, to the mortgage and utility payments you make each month. Ask your partner and children to do the same. Even grade-school children can benefit from learning about managing money.

This task serves two purposes: 1) It holds you accountable for every purchase. 2) If you have to record each purchase, you will think twice before making impulse purchases.

When logging your purchases, make sure you're specific. If you write "$52.17 at Wal-Mart," that doesn't tell you what you bought. Pull out those receipts you usually ignore and break down the purchases. Soon, that $52.18 at Wal-Mart becomes $11.95 for health care, $33.24 on groceries, and $6.99 on education (school supplies for your daughter's science project). Write down the small stuff. Candy bars might cost just 65 cents, but if you buy three a week, that's $101.40 a year!

Sample Spending Log
Date Place  What did I buy? Category/Reason $ Amount
1/1 Grocery 1 week of groceries Food $150.52
1/3 Pharmacy Prescriptions Healthcare $10.07
1/5 Wal-Mart Vitamins Healthcare $11.95
1/5 Wal-Mart Groceries (lunch snacks, milk, eggs) Food $33.24
1/5 Wal-Mart Art supplies for school project Kids/Education $6.99

If you can't remember how much you spent, guess. Don't leave off your gas purchase because you can't recall the exact amount. It's better to estimate than omit.

After the month is over, examine your spending and categorize your expenses: housing, utilities, food, transportation, clothing, medical/health, entertainment, debts, savings, and other. You should also examine which members of your family are responsible for which expenses.

Do you notice any trends? Are you making more "extra" purchases just after payday? Do you rely on credit cards more at the end of the month? How are your children spending their allowances? How much are you and your partner spending on lunch each day?

Extra credit: Separately track purchases you didn't make. Edit your online budget or print off a second Spending Log to track purchases you wanted to—but didn't—make. The new CD you got from the library instead of the mall ($15), the drive-through meal you skipped for a meal at home ($15 for all four of you), and the shoes you tried on (but didn't buy) at the department store ($45) are technically money saved. Though it doesn't increase your bottom line, it doesn't decrease you bank account balance either. If you had bought all three of the items above, you'd be out $75!

Keep reading! Starting and Sticking to a Budget - Step 2
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Member Comments

thank you Report
Just so you know, the "online spending & saving tracker" link leads to an error. Report
Thanks for good information. Report
Great ideas Report
Thanks for the great article! :) Report
Great. Report
This has a lot of valuable information in it. Report
I created my own workbook with excel years ago and use that to record all of the spending in as well as the income. Really helps to know exactly where the money is going Report
Quicken is quite popular in managing daily transaction in confined and systematic manner. Through this you can easily track your transaction on daily basis and monitor the proper functioning of your business. For example you can create a physical inventory worksheet to keep proper track of inventory bought, consumed and even calculate the remaining stock to place new order.

For payment you can use business checks that you can get from https://www.check
/quicken-checks/ or any other online source. Such feature of this software helps to generate reports and verify the stock anywhere at anytime. Report
Very informational, but the link for Step 2 and some of the worksheets didn't work, wich leaves me wondering what to do next.

Thank you for sharing this info.

My husband and I after paying all of our bills each payday...usually have just enough left for gasoline and groceries every two weeks. Once in a great while we get lucky to have "extra" to treat ourselves to a movie rental and even greater blue moon go to the actual movies. We don't mind keeps us debt free. Report
I could not find page 2 either. Another great online financial tracking tool that is free is
. Report
apparently page 2 is not found :( Report
I cannot get beyong the first page. It says page not found. :( Report


About The Author

Stepfanie Romine
Stepfanie Romine
A former newspaper reporter, Stepfanie now writes about nutrition, health, fitness and cooking. She is a certified Ashtanga yoga teacher who enjoys running, international travel and all kinds of vegetables. See all of Stepfanie's articles.