If you’d like to try a simple way of tracking – and reducing – your expenses, I recommend a system I started earlier this month. It is easier than creating a full blown budget that requires you to track down where every penny goes. I like it because is simple and tells me if I am spending more than I am making.
My streamlined budgeting formula follows this equation: Income minus savings minus necessities minus irregular expenses = discretionary spending.
Here is how I define each category. Tweak it to fit your situation.
Necessities: rent, gas, electricity, Internet service, cell phone service, gasoline (Hubby and I each get one full tank a month seeing how I work from home and he commutes on his bike), doctor visits, medicine, gifts and my newspaper subscription to the Sunday NY Times (which is on the chopping block)
Irregular expenses: car insurance, car registration, car repairs, dental visits, Christmas presents, magazine subscriptions, charitable donations, vacations, yoga classes, and oil changes. I totaled what we spent on these categories last year and divided by 12. I automatically deduct this amount from our checking account into a special ING savings account each month.
Discretionary spending: food, clothing, bus fare, entertainment, vitamins, toiletries, meals out, hair cuts, travel, and home maintenance. To see why I put food on the discretionary list, go here.
My discretionary spending started at $796.50. Each time I make a purchase or withdraw cash from the ATM I write it on my card, above, then subtract it from my total to get my remaining dollars. If I spend my discretionary equally over 28 days, I should have $256.01 left right now. Woot woot! I’m ahead of the game because I have $344.63 left. Hope I can make it to the end of the month. Luckily, it’s a short one.