Is budgeting a dirty word at your house?

Most of us think that we don't overspend (OK, maybe secretly we're afraid that we might), but we don't have a good handle on how much "discretionary spending" we actually do, because we're far too busy to keep track of every penny we spend.

And that's precisely why, before we get to the end of the month, we find we've reached the end of our money!

That's when you definitely know that you need to invest the time to do some financial budgeting, a crucial step in money management.

So, exactly how do you go about figuring out how you can spend less money?

The first step to reducing your spending is to discover how you're currently spending the money you have. And I use the word "discover" because most of us really don't know how our money is being spent -- we just know that it is!

The best way to determine how you spend your money is to make a concentrated effort, involving the entire family, to write down exactly how much you spend every day (to the penny) for an entire month, and what you spend it for.

You don't have to start at the beginning of the month, but you do have to start! The best time to start is today (or tomorrow if it's already late today). If you procrastinate to wait for the start of the next month, you're just that much farther behind in starting the budgeting that will help you get your family on track for financial freedom.

For the first month, just make an honest record of how much your family spends each, so you can find out where your money is really going. This is not the time to change your spending habits. You want to see how you're actually spending your money, and you'll probably find some surprises.

You may want to create categories before you start your list, so you don't find yourself calling the same expenditure by several different names, and you have a place to record your expenses that makes the process easier.

For example, you might use these categories:

  • Groceries
  • Meals Out (or Dining Out)
  • Housing (include rent or mortgage payment, electricity, natural gas, heating oil, water, etc.)
  • Auto (include insurance, maintenance and repairs)
  • Clothing (include dry cleaning)
  • Child Care
  • Medical (include health insurance)
  • Personal Care (items such as hair cuts, manicures, makeup, personal grooming items, etc.)
  • Entertainment (include TV cable or satellite, video games, sports tickets, concert tickets, golf, nights out with the guys, etc.)

This is by no means a complete list. It is just designed to get you started. Sometimes, just having to figure out a category to put the expenditure in is enough to make you question whether it's really something you want to be spending your hard-earned money on.

Then, if you have kids who are old enough to start learning about budgeting money (right now yours, and eventually theirs), you may want to make this a family game, to see who spends the least amount every day. Make up a chart, or if you have the technical skills, set up a budget spreadsheet in Excel, that lists each family member, and a place to record each expenditure he or she makes for the day. Or you can use budget software if you already have it.

You can create a daily sheet, which will have everyone's name on it and a place to list what they spent that day, or you can create a monthly budget spreadsheet for each family member, so that person's expenses are all on the same sheet. If you have teenagers, this might prove useful for some budgeting discussions with them, too, so they can start learning about budgeting money.

Just set up the system that will be easiest for your family to stick with for 30 days. The important part is not HOW you keep track of this information, but THAT you keep track of how your family is spending your money.

When you sit down for dinner each day (and I hope your family does make it a point to sit down for dinner together most days, because that's such important family time), go around the table asking each person to report how much they spent, to the penny, and what they spent it for. (Family members will need to write down the exact amount each time they spend money, because relying on memory for what you spent all day does NOT work.)

You may meet some resistance to this, but if you have a family member who is spending money on something he or she doesn't want the rest of the family to know about, that's a whole different problem. If you have one of those teens who insists on her privacy as it relates to her siblings, let her report to you separately on things she doesn't want her siblings to know about. But make sure she is accountable for every penny.

To make it more fun, and more competitive, you can create an inexpensive weekly prize for the family member who spent the least amount of "frivolous" money -- this can be something as simple as you agreeing to do their least favorite chore for them, in exchange for their contribution to saving money.

Or if you have a larger family with several kids, you could make the one who did the most frivolous spending do one chore for the week for the child who did the least frivolous spending. The key is to make it something that will be fun, encourage competition, and stress the importance of being aware of how much you spend every day.

Let me stop right here and remind you that just because you still have checks does NOT mean you still have money!

Some of you will laugh at this, but as I began doing research for this program, I encountered a number of sources, both officer and enlisted, who told me I needed to include that as one of the lessons we teach. I, too, laughed, and said, "You've got to be kidding me!"

I didn't realize that our program needed to contain such basic financial education, but I've been assured that it does indeed need to start at that basic level. Perhaps other programs make the same assumption, so no one includes very basic money management.

In all seriousness, these people explained to me that they had members in their units who were in financial difficulty because either the service member or their spouse didn't understand that there has to be money in your checking account before you can write a check.

So, you've now been reminded: Just because you have checks doesn't not mean there is money in your account to cover all the checks you can write. For example, there's nothing to prevent you from writing a check for a million dollars. But how likely is that your bank will honor (pay) that check?? Ah, there's the problem.

AND, as a former prosecutor, I'll also remind you that writing checks that you don't have the money to cover is a crime for which you can be prosecuted, both in the military and civilian courts. The only thing that needs to be proved is that you knew at the time you wrote the check that there was not enough money in your account to cover it, or that there wouldn't be by the time it hit the bank. That's very simple to prove with your checking account and ATM records, which can and will be subpoenaed from the bank. One of the last cases I prosecuted in the military was a bad check case, and it was quite simple to prove with bank records.

So, the bottom line is, DON'T DO IT!! KNOW how much money is in your account BEFORE you write a check.

Once you have kept track of your spending for an entire month, recording your daily spending will have become a habit, and a good one at that. Staying in control of your spending requires that you know what you are spending and what you are spending it on. You'll likely be amazed to see the gap between the money you accounted for, and the money that came in, showing just how much of your money you totally forget to account for, even though you were trying to be conscientious about it.

Then, you will be able to sit down as a family, and determine where each family member could reduce expenses. Once that is done, you'll be able to create a personal and/or family budget.

Take advantage of military discounts offered by a number of leading merchants. And when you ask for your military discount, let them know how much you appreciate it!

Here are 111 Easy Ways to slash your expenses and spend less.

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