Where Is My Money? Part 3 - The Beginnings of a Budget

I hope you were able to go through our little exercise which started last week, as you can read HERE. If you haven't been able to even start or had missed out on some days, you can always try again this week. And unless your routine changes significantly week after week, a week's worth of recorded expenses can start you on your way to developing a budget.

Too many people start on a budget but fizzle out almost as soon as they started. There are a number of factors that contribute to such short-lived initiatives:

1. They don't know why they do it. They don't realize that budgeting is all about living out a lifestyle. If you're a bit lost yourself, maybe you can start right HERE.

2. They don't know where to start. Despite the availability of so many guides and how-tos, people still end up feeling stuck at the start, not knowing how to proceed. It's possibly due to conflicting approaches or ones that require them to change too much too soon. That's why we started with something simple in this blog, as you can read HERE.

3. They don't have much with to start working on. That's why we went through a bit of an exercise on recording our expenses, to give us a headstart on what are we looking at.

Ultimately, a budget is a personal exercise. And the less I impose on stuff here (like how to record, where to summarize, etc.) and stick with providing some sort of a roadmap, the more likely you can come up with something that fits you (believe me, you are that smart). Even my own approach is still evolving and will continue to do so. What doesn't change are a few basic items.

So, what to do now? If you already know your disposable income (as discussed previously HERE), you can deduct from it an estimate of your monthly personal expenses with the week's worth of expenses that you recorded (just multiply by 4, or maybe divide by 7 and multiply by 30 or 31). Hopefully, you will come up with some excess cash. If you did, Congratulations! But before you pat yourself in the back (which you probably deserve), just go over your expenses one more time to make sure of two things:

1. You didn't left out any significant expense. Most of the time you won't really get to realize it, especially with just a week's worth of information. As you gather more weeks of information, you can actually check if you haven't recorded some regularly recurring items, and adjust accordingly.

2. You recorded expenses not paid in cash. Maybe you've swiped your card for that lunch? Or that book? Otherwise, you will be creating the illusion of having excess cash when you actually are living on credit already.

Now, if your expenses exceeded your disposable income, you now know you are probably living on credit or off your savings. And if that trend continues, you can end up in some financial mess. Which is precisely what we will try to address in the coming weeks.

Make sure to brush yourself up on the previous posts, and start on some of the activities if you haven't done so. See you again soon. I will be more than glad to hear from your experiences so far.