“Budgeting and How to Track Expenses is Part 1” is the first this series and “Budgeting and How to Track Expenses Part 2” is next. This is the final post (part 3) in this series and the first two are great places to begin if you’re ready to start the budgeting and tracking spending process.
This should really be titled, “Budgeting and Tracking Expenses Part 3 – the FUN Part!” Don’t forget – frugal can be fancy and fun!
Now that you have put together both your total monthly spending and monthly spending broken out by spending categories you are ready for the fun part – making sense of where your money is going and making changes so that you are allocating it to where it really aligns with what’s important in your life.
One big thing to keep in mind is that there is no possible way you can do everything – buy everything you want, travel all you want, provide everything for your kids that you want, not to mention what they want, or save as much as you want. Since there will never be enough time or money to do all these things to the level you’d like, it’s best to get comfortable right now with the idea and inevitability of prioritizing.
Budgeting and How to Track Expenses Part 3
Let’s review – remember the FAITH categories are…
F – Food
A – Apparel – clothing for yourself and your home
I – Insurance
T – Transportation
H – Housing
With that, let’s get going. Here are the next steps….
Understanding what it means and assessing where you are
Calculate a monthly average for the 12 months by the FAITH categories, or the categories you chose. Review your spending by category to see where your money is going to get an understanding of the “reasonableness” of each category. For example, ask yourself – does it make sense for a family of 4 to spend $800 a month on food and going out to dinner? Take some time to look at the details behind the categories to really understand what makes it up. How about the H (or housing) in your FAITH categories? (This is the category where utilities would go.) Which are your biggest utility costs? Electricity, gas, or water? Are these reasonable amounts for your family?
Aligning personal and family priorities with spending
Based on the review from above, consider if where your money is going makes sense with how you want to be living. Does your “Other” category contain a lot of things that kind of just happen versus deliberate choices of what you’d like to be doing or saving. Can you afford your lifestyle?
Setting goals and objectives
Since we can not do everything, because of time and money limitations, we have to prioritize. Really think about what your objectives and goals are. Do you want to stop living from paycheck to paycheck? Do you want to save for retirement? Do you want to save for a trip? What about college savings? Do you have another financial goal in mind?
All of these questions will give you the hook on which to hang your priorities. Start out small and don’t shoot for the moon – yet. Go with something that you can start and finish AND have a victory with! Your goal could be as simple as: I would like to create $100/month in savings by reducing the F (food) and A (apparel) spending categories of FAITH.
Start making changes
Now for the good part. This is where you use your understanding of where your money is going and align it with how you want to live. Next, you can change and redirect in accordance with your goals and objectives.
This is where people get discouraged because they think of these changes as painful, life disrupting “cuts” versus fun, life enhancing alignment of your money outflow with your priorities. By spending only on what YOU determine is important, there will be money to do what YOU really want.
WHEW – that’s a lot to think about! I’m exhausted! Are you?
Next up, I’ll be sharing specific, concrete, and actionable ways to reduce your FAITH spending categories. There are lots ideas – both simple and more involved. Which changes to make will be up to you. You’re the best person to determine what will work for you but remember to start small rather than tackle all. (Oh – I think I just made a rhyme! See – budgeting can be fun!)
What are you saving money for these days? How do you redirect your resources?
Go Gingham related links:
Tried and true investing strategies – a question asked by Annie!
Just balance that checkbook! You can do it!
Frugal living is the key to saving
The problem with budgeting – yes, the problem!
How finances figure in frugality
Budgeting and how to track expenses – Part 1
Budgeting and how to track expenses – Part 2
2 thoughts on “Budgeting and How to Track Expenses Part 3”
Sara, I know this kind of post must not be very fun for you to write, but it is tremendously helpful to me. Anytime you breakdown your process into baby-steps, I really appreciate it. So much of what you do on a regular basis is like rocket-science to the rest of us. Thank you!!!
Annie, you know me too well! No, I don’t particularly like this topic because it’s not pretty or sexy but it is absolutely important. Too many people live beyond their means and others don’t know how to come up with money each month when told they need to save for retirement. Thank you, Annie. Glad to hear that the baby-steps help you!
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