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Home / Budgeting / The First Step To An Effective Budget: Tracking Expenses!


Budget CuttingYes, the word budget can make someone with a cast iron stomach worry they may lose their lunch. There are several theories as to why that is, one is that people do not have enough knowledge about budgeting to feel comfortable with it. That sounds logical, so here is a recommendation for a solid first step that may help you get started on your way to becoming a well oiled budgeting juggernaut or at least a tad less put off by the prospect of a budget.

Tracking Expenditures

Is it really that simple? You know where all of your money goes every week already, right? If you are like the vast majority of the ”unbudgeted,” you can remember about 75 percent of the purchases you make each week. Those purchases are likely to account for about 80 percent of the money you actually spend. Not bad, but makes for an ineffective budget. The true secret to creating a budget is knowing where every penny goes.

How To Do It

There are plenty of ways to track your expenditures, including a pocket-sized notebook and smartphone apps. How you track your cash flow is not the issue as much as making a commitment to tracking it. Many of us will buy a soda or coffee after fueling up, or buy lunch and then forget the purchase. That leaves us wondering where that $30-$40 each week has disappeared to. If you are tracking all of these purchases immediately after making them, you may find that you are wasting quite a bit of cash on unnecessary items. Please notice the stress on tracking every purchase, no matter how small.

How Long To Do It

You should keep track of your cash outlay for at least three months. The first month you will probably find yourself forgetting things on a regular basis. This is normal and will decrease throughout that month. During the next two months you will become aware of areas where you can save money and may even start cutting back without having to spend too much thought on it.

After tracking your expenditures for three months, you should be ready to form your first budget. While that is the stuff of another article, you will find that the tedium of tracking your cash outlay will greatly pay off by making the actual budget much easier to create. Good luck with your tracking and hopefully you will find our article on forming a budget helpful as well.

Editors Note:  Can’t agree more with Jerry on this one!  My grandfather gave my mother a small notebook to track all of her expenses when she went off to college, and my wife and I are implementing the same practice right now to trim our monthly expenses.


About the author: Jerry Coffey


Jerry Coffey spent many years in a debt-riddled gray area somewhere between broke and desperately broke. His seemingly endless need for more and more cash led him to payday loans, repossessions, bankruptcy, and depression. After years of the same financial style, he heard a piece of advice that inspired him to find a way to change. The advice: ''The very definition of a fool is someone who continues to do the same things, but expects different results.'' This led him to a much more frugal lifestyle that sees all of his bills paid on time and a growing savings account. Even the seed of a retirement account has begun to sprout.


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