You wake up one morning with a smile on your face and you say to yourself, “Today I am going to learn how to budget my personal finances.” Carefully you take the time to construct yourself a personal budget. You use a spreadsheet, or an app and you spend a couple of hours adding in each expense over the last month, all of your income, and tracking everything. You look at your final product and you are thrilled with it. You set it aside for a bit, and then come back later to it and start adding your expenses, income, and as you get started you can feel that you are losing some of the excitement of this project. Sometimes, you can’t even get yourself to track a second month of your personal finances. At this point you feel that exciting budget die and it sits dormant for a few months, or a year, and then dissolves into nothing.
Why is it so hard to track personal expenses and stay on top of it? It is psychological. Obviously, we want to feel money coming in and if we could just track income it would be fun and exciting. However, expenses are clearly a negative mark on a personal finance level. We feel our latest dining options, fun activities, and needs start to diminish our hard work, and to top it all off, we have to sit down and actually take the time to track each one of them which takes even more of our time.
The best way that I have found to track personal expenses without allowing the negative feeling of deducting money from my income is to create a remainder at the bottom. When you create a budget, you will typically look at three things and I will go through each one here. Note that there are many other categories you can put into these broader categories, but these are the main components:
Tracking your income at the top of your budget is usually the place where we start. It is the most exciting. It makes you happy to see your gain listed out at the very top. You worked for this money. It is yours to spend. Adding it at the top of your budget is instant pride in what you do. Income usually doesn’t happy daily or even hourly, so it is also very easy to track it in just a few transactions.
This is where you track personal expenses in your budget. Housing, utilities, food, fun, debt, and everything else you decide to spend your money on goes in this category. Technically savings can also be seen as an expense because you are removing income and moving it elsewhere so that it appears “gone”. It is more difficult to track because these come in daily, hourly, and constantly throughout our budget period. Sitting down and doing these all at once at the end of a month, or two-week cycle is recommended to keep yourself focused on the goal. This feels more negative and will decrease your satisfaction in your budget as you enter them.
Add back in the excitement of budgeting your personal finances by taking your income, subtracting your expenses, and coming out to a remainder. Now, as you enter expenses you can see how much income you have left. Having a goal to keep this positive is what will also keep your mindset positive. You will see that your income is covering your expenses and you are living a fulfilling life doing it. If this starts to go negative, it can have the opposite affect and start to crush your budget again. Focus your goals on just keeping this positive to keep your outlook on your personal budget positive also.
There are tools, and apps out there that will help you track and categorize your expenses for you. There are many that believe you should manually track these so that you can self-identify where you might be spending more money than you should. The way you track your expenses is up to you. Focus hard on keeping your remainder positive. In one month if you are positive and the next negative, roll them together to keep the running total positive. Whatever it takes to keep your personal monthly budget in a space that makes it pleasing for you to spend time on and work with is important to the success of your own personal money management.
Lastly, I recommend keeping most of your expenses in one place. Use a debit card, or a single credit card that you pay off monthly so that your expense level is always visible to you. If you start to use multiple credit cards and debit cards you will spend more time pulling up all of your expenses than it is worth, and you might underestimate your total expenses leaving your remainder negative. Take the time to pick where you want your expenses to show up, and then stick with that method.
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