In my last post I created a simple budget form for you to use. If you fill it in you will probably end up with a surplus and wonder to yourself where that surplus is at the end of the month. That’s why most people will need to track expenses for about six weeks to check your calculations. While you are tracking try to stay within budget while not deviating from your usual activities.

Don’t analyze your spending until the end of the six weeks. When you get to the end of tracking place each expense into its budget category but keep your original tracking nearby.

Where you can you should try to pare down expenses. In any category where you underbudgeted you must do one of two things - transfer money from an over-budgeted category  or cut down on the spending you are doing in the underbudgeted category.

What to Watch For

The first flag in your spending is the “Latte Factor” - I wish I could claim that name but I think I got it from Suze Orman. The Latte Factor accounts for the daily luxuries that you afford yourself (like a daily latte). One at a time they seem to make a very small dent in your budget but over the year they can add up to a mortgage payment!

What are your Latte factors? Soda pop? Coffee? Cigaretts?

The next step is to look at your repetitive spending of non-essentials - CDs, clothing, comics, videos, etc. Non-essentials are often, but not always, impulse buys. How can you regulate your spending habits in the non-essentials by breaking the impulse to shop/consume?

In the next budget article we will discuss interests, goals, and implementation!