Step Four: Calculate the total for each of the five categories: Home, Travel, Debt, Savings, and Other.
Don't be alarmed if your totals exceed the recommended parameters at this stage. That's why you're creating an Initial Budget - to get a sense of which items need to be adjusted. This is merely your starting point.
You may already recognize some areas where you can make immediate reductions. As in our opening example with coffee, when you are confronted with the actual amounts of some of your expenditures, the decisions become easier to make.
Step Five: Journalize your spending.
Now that you have an Initial Budget, it's time to track your spending so that you have accurate figures to use in developing your Adjusted Budget. Journalizing will give you a truer sense of where your money is going because you'll be tracking your spending on a day-to-day basis.
Journalizing simply involves keeping a small note pad, or spending journal, with you at all times to record every purchase you make, no matter how big, no matter how small. You also need to save all of your receipts so they can be compared to your spending journal. We recommend that you journalize for at least three months to ensure that you get an accurate idea of what your average month's expenditures really are. Journalizing during a holiday period or during back-to-school shopping days alone may distort the picture you're trying to develop.
Click here to download the GoodPayer.com Journalizing Sheets