In Part 1 of this budgeting series, we gently poked holes in some of the common excuses people offer as to why they don't budget. It is my opinion that some form of budgeting is essential for Christians to be wise stewards of the resources God has entrusted to us, and hopefully that article helped convince you as well. If you want to honor the Lord with your finances, but don't know where to begin, this series is for you! Let's get right to it.
Tracking your current income and expenses is the first step in constructing a balanced budget. Before you are able to make thought-out, meaningful adjustments to your spending, you first need to know where your money is currently going. Many people are surprised at the difference between how they think their money is being spent and what they find the actual numbers to be, especially when it comes to the “fun” areas of spending, like recreation and clothes.
But before you begin tracking, it's helpful to first designate categories to guide you. Listed in the Income and Expense Category Table are the primary expense categories taken from Crown's Biblical Financial Study Practical Application Workbook. Use these to get started; you can always add or subtract categories later for a more personal fit.
Next to each category are the common types of expenses that will be recorded there. These guidelines can reduce confusion, since it isn't always clear where a particular expense should be recorded. For instance, to which category does eating out belong, Food or Recreation? Likewise, should auto insurance fall under Insurances or Transportation? Keep in mind that these are just guidelines, not hard-and-fast rules. Your situation may call for assigning expenses differently, which is fine. My wife and I included car payments in our Debt category, rather than the workbook's suggestion of including it with Transportation. Either way, it gave us a clear idea of where our money is coming from and where it was ending up, and that's the whole idea.
Armed with these categories you're ready to start tracking your income and spending. Tracking your expenses closely for 30 days will give you a fairly detailed view of your spending habits. You'll continue to track your spending beyond this initial period, but one month usually provides sufficient detail to allow you to start working on your initial budget.
As you begin tracking your spending, try not to alter your habits or routine. That may sound like odd advice, but we're not trying to change any spending habits yet; we merely want to establish what those habits are. For now, the only thing different about your spending process is that you'll be recording it.
There are a number of ways to go about this tracking process. One easy way to set up your tracking is to have a notebook with a separate page for each category. You can either carry this notebook around with you and record your spending on the appropriate page immediately, or just keep all of your receipts and record them at the end of each day (watch out for small cash purchases if you do this). The Crown workbook puts all of your spending for the month on one page by listing each category as a separate column across the top of the page, and each day of the month as a row beneath that. This layout is easily duplicated using a standard notebook or a computer spreadsheet. Those already familiar with a money management program like Microsoft Money or Quicken may choose to use it to track their spending. The key isn't how you track, but that you track diligently.
At the end of the tracking period, you should be able to add up the transactions within each category to get a rough idea of your typical spending. We'll use this information in Part 3 to construct your initial budget.
(This article courtesy of Agape Press).
