My first rule of budgeting: Write it Down!

by Nick on July 28, 2010

Earlier I revealed my top ten rules for starting a budget.  The first one I listed was a simple one – writing it down.  It has nothing to do with math, what to buy or what not to buy.  It has nothing to do with interest rates, inflation or how to put the shopping cart away and step away from the mall.  It’s all about changing your behavior and becoming accountable and deliberate with your spending. 
This was the hardest one for me to get.  And it was the one that just kept messing me up.  For years I thought I was keeping a close eye on my finances because I had online banking that I checked daily and I always seemed to have some money left over at the end of the month.  And, my friends always laughed at me for being “cheap” or because I drove an old car that I could buy with less than a week’s take home pay (not because I made a ton of money either…). 

I thought that if I watched everything that went in and out of my account I was doing fine.  If I wanted to see how much I was spending I could just print out a date range, right?  Wrong.  Technically I could print out my bank transactions, but it was far from perfect (and, in reality I never printed it out either).  This went on for years.  Big mistake.  I missed a lot.  For example, I would go to the ATM and pull out a some cash to have for lunch “or whatever, just in case” and it seemed to burn a hole in my pocket – a few dollars at a time.  Within days I found myself grabbing some more.  Gone.  I once joked (probably the least funny joke I ever told – and if you know me I tell a lot of bad jokes…) that I couldn’t leave the house without spending $20.  And I left the house a lot.  Ouch.

That all changed in the summer of 2009.  I didn’t start a budget then.  I started writing everything down that I spent.  Everything – even a quarter gumball.  That was enlightening.  I found my latte factor(s).  Because my friends who made fun of me were right – I am cheap – I did not have a ton of “stuff” to cut out completely.  But my latte factors were a bunch of “stuff” to cut back on. 

Lunch, for example, cost me almost $10 per day.  I work in New York City, so the native NYers may be thinking “that’s not bad for NYC.”  But “not bad for NYC” is not good enough for me.  So what did I do?  I set a lunch limit of $6 per day for me (when I pay…. (if I skip a day or two I may allow myself a little more every once in a great while).  There are a bunch of places I can get lunch for less than $6 around where I work – good tasting and healthy food too.  And drinking water actually cuts down the calories of my lunch, so there were some health benefits too.  Plus, the limit keeps me from going out to sit-down lunches that keep me away from my desk during the day – so I’m more productive at work too.  Guess what that did?  Earned me more money!  Why?  I don’t get paid by the hour (as Michael Scott once said: “Actually, I don’t get paid by the hour anymore, but thank you. I get paid by the year.”), but I can earn more by working more.  So being at my desk saved and made me money!

What do you think?  It seems like a lot of work doesn’t it?  It’s really not.  Actually the less you spend the less work it is (you would right less if you spend less, right?).  You get in a routine.  You save money and may even make more money.  It only takes a few minutes a day and there are a ton of ways you can do it – paper, software, Excel or other worksheets are just a few.

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