One Money Design

After much effort and probably frustration you have a balanced family budget.  Congratulations!  You can now tell all of your friends and family you’re living on a budget (they’ll probably look at you funny), you have a spending plan and you’re working your way towards debt free day and financial freedom. 

Now what are you supposed to do, follow your plan, right?  Not so easy, is it?  Tracking expenses against your budget takes some time and effort, but it can be accomplished by anyone.  Whether you set up your budget using software, use a spreadsheet or on paper, you have to have some mechanism to track spending against each of the budget categories you’ve identified. 

There really isn’t another way to know how well you’re doing against your plan and the balance of each category unless you actively track against your budget.  There are some simple guidelines you can follow which I try to use when tracking expenses for our family.

1. Expense tracking is not a substitute for balancing your checkbook or reconciling expenses with online banking.  Your account tells you your balance.  Your expense tracking form tells you the balance in each budget category. 

The sum of your categories should equal your checking account balance.  Having an online balance of $1000 won’t help you when you need to know how much money is available for food the rest of the month.

Why reconcile the checking account and track against budget categories?  This is a post in itself, but in short, you need to make sure what you record (in your checkbook, software or other matches the banks transaction.

Here is a sample budget expense tracking form by Crown Financial Ministries. 

2. Try to set a few minutes aside each day, if you’re the family CFO, to update your expense tracking tool.  By taking 10 minutes each day, you will have an updated balance for each category and can make better spending decisions.

3. Reallcoate spending when necessary.  Let’s be realistic.  Some months all the money may not be spent for the food category and maybe you decided to apply the extra to a credit card bill.  Simply, transfer the $50 from food to debt and make the payment (and record the payment too).

4. At the end of the month, review your spending for each category in comparison to your budget.  Were you’re over or under in certain categories and why?  Make any appropriate adjustments to your spending plan for next month.

5.  The fewer the transactions, the easier it is to track.  For example, if you’re able to pull out cash for food for the entire month, you only have to record one transaction in your tracking form.  Whereas if you use a debit card for every trip to the grocery store, you have to reconcile it with your online bank balance and record in your tracking form. Can you think of other guidelines to follow?