Personal Budget Tips on Expenses

Knowing where your money goes is essential when preparing a personal budget.

Developing a personal budget is one of the smartest money moves you can make, and one of the most basic. Until you have a realistic personal budget in place, you might not be able to know where your money is going, and where you can cut back on expenses and save money. You can use a number of different tools, from budgeting software to expense tracking, to build a budget you can stick with.

Envelope Budgeting

Envelope budgeting can be very effective, and an excellent way to force you to live within your means. With envelope budgeting, you set aside a specific amount of money for various categories of spending, including restaurant meals, grocery shopping, entertainment and gifts. When you deplete the money in an envelope, you are done spending in that category for the month, unless you choose to pull money from another part of your budget.

Spending Notepad

One of the most effective ways to budget your money is to track every purchase you make, no matter how small. Something as simple as carrying a small notepad with you everywhere you go, and using it to record all of your purchases, can be a real eye-opener. After you have spent all day recording every cup of coffee, every restaurant meal and every other purchase, you can review those purchases to see exactly where your money has been going.

Budget Software

The right software can make creating a personal budget a lot easier. You can, of course, create your budget on the back of an envelope, but using a formal budgeting software program can make it that much easier. Budget software is designed to help you create a detailed personal budget in a minimum amount of time by using standard spending categories for your household. You can customize your budget further by adding your own categories and changing the ones provided by the software. You can also import data from other applications, including spreadsheets, accounting software and tax preparation packages. That import capability can allow you to create a budget much more quickly than you could on your own.

Spending Categories

When you create your budget, it is helpful to use as many spending categories as is practical. Breaking each of your spending categories down into multiple subcategories can make it easier to track, and ultimately trim, those costs. For instance, you can break down the "Food" category into several categories, including grocery shopping, restaurant meals and takeout food. Breaking your spending down into those subcategories will make it much easier to determine exactly where your money is going, and to find ways to cut back without affecting your lifestyle.

References

• CNN Money: Making a Budget