Basic Budgeting Part 3 – Methods
You can also think of expenses in terms of these two categories
categories: Necessary and Discretionary.
Necessary
Necessary expenses are expenses
penses for basic living needs. Examples include shelter, groceries,
utilities, insurance, medical, necessary debt payments like your auto and mortgage and taxes.
Discretionary
Discretionary expenses include items not necessary for survival: vacations, en
entertainment,
tertainment, special
clothing, or eating out. Those would all be discretionary.
You will have unplanned for expenses. So it’s best to determine what your necessary vs.
discretionary items are so that, if possible, you can discard your discretionary.
Track Your Spending
There are many ways to track your spending. Here are four of the common ways we suggest.
Receipt method
This method uses the receipts received from purchases to track your expenses. If you don’t get a
receipt from a purchase, you will have to make one. If you lose receipts consider taping an envelope
to the fridge until you are ready to track your expenses, your envelope will keep your receipts nicely.
NOW, gather all those receipts for the last three months and group them into categories. Add each
category and divide by three to get your average monthly expenditure per expense category.
Envelope Method
The next method is the envelope method. This involves allocating a certain amount of money into
an envelope for each expense category. Once the money from the envelope has been spent, no
more money can be spent on that expense until the next month or p
pay period.
Checkbook Register
The checkbook register method. This method utilizes your regular checkbook register to track your
expenses.
The next method we suggest was the computer program. There are many programs you could use
out there, for example: Quicken, Microsoft Money or QuickBooks . They’re all excellent ideas.
However, you have to have the diligence to manager your system and track your expenses regularly.
Once you’ve used one of these or another tracking method, you have to be disciplined on tracking it
regularly. You’ll also be able to figure out where your money is going. You will be able to identify
your “budget busters” or “spending leaks.” Budget busters and spending leaks are items we
purchase that drain our budgets dry without us even realizing it.
An excellent example of a budget buster is eating out. Let’s say eating out takes $8.00/day out of
your budget, that $40.00 a week, $160.00 a month and almost $2,000 a year.
For more helpful tips and advice, be sure to visit www.macu.com/moneymoment