Staying on track

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7.1 Objective

This section talks about the importance of staying on track with your budget. We can all set goals and have great ideas, but if we don’t take action or stick to our plan, we will never achieve our goals. If you take the time and make the effort to create a budget, then you owe it to yourself to stick with it. Think of how good it will feel when you reach your goal.

After reading this section you should have a basic understanding of the following concepts:

- Recognizing budget blowers.

- Organizing and tracking spending.

- What to do when you get off track.

7.2 Recognizing Budget Blowers

Budget blowers are those purchases we make that don’t fit into our budget. Sometimes, we make the purchase and don’t think about the impact on our budget until later and, sometimes, we think about the impact but make the purchase anyway.

One of the biggest budget blowers are those ―little‖ expenses—a morning coffee, a soft drink, a lottery ticket. It’s important to remember that small purchases add up over time and these ―little‖ costs can do a lot of damage to our budgeting efforts.
For example, many people like a nice, hot latte on their way to work. After all, there’s nothing wrong with a little coffee to jump start your work day…and it’s only pocket change, so it won’t impact your budget…right?
Well, you be the judge. On average, a latte costs $5. If you stop for a latte every day on your way to work, it will cost you $25 a week!

Here’s a snapshot on how that adds up over a year:

Daily Latte Cost = $5
Weekly Latte Cost = $25
Monthly Latte Cost = $100
Yearly Latte Cost = $1200
$1200 is enough money to insure your car for year or go on a vacation!

Another sneaky budget blower can be found lurking in your relationships. Maybe you have a friend or relative who’s always asking to borrow money. You want to help them out and they only need a little bit like five or ten dollars. However, these small loans can add up quickly, especially when they don’t pay you back. If you lend a friend $10 a month and they never paid you back, it’s like throwing $120 dollars out the window each year.

We’ve covered two examples of budget blowers, but it’s important to know there are a lot more. Budget blowers include shopping trips, gambling (bingo, casino, poker nights), online auctions, buying tabloid magazines, and any other expenses that you haven’t included in your budget.

To be successful with your budget and achieve your financial goals, you need to be aware of budget blowers that get you off track and have a plan to address them. For example, if you like to read the weekly gossip magazine that costs $5, you could spend $20 a month. But, if you start a magazine exchange group with three of your friends, you could take turns buying the magazine and then circulate one copy. This would bring your costs down to $5 a month and you would save $15 each month and still get to read all the latest gossip!

Take a look at how this magazine example could affect your yearly budget:

Magazine Budget Blower	Magazine Budget Balancer
Weekly Cost $5	Weekly Cost $5 (but only one week per month)
Monthly Cost $20	Monthly Cost $5
Yearly Cost $260	Yearly Cost $60
Budget Blower $260!	Savings $200

7.3 How to Organize and Track Spending

Keeping track of where your money comes from and where it goes is the most important step in understanding your spending habits. Have you ever found yourself asking the question ―where did all my money go‖ just a few days after payday? Well, the good news is that tools and tips are available to help you keep organized and on track with your spending.

7.3.1 Spending Journal

A spending journal is a cost effective method to help you track your spending and stay organized. All you need is small notebook or pocket calendar. Shop around and see if you can find one with a folder to hold receipts.
For just a few dollars you can use this tool to track your spending for the entire year.

Each time you make a purchase keep your receipt and enter the purchase in the notebook / calendar. Once a week, add up all your receipts and make sure they match your notes and are entered in your notebook / calendar. At least once a month, add up all your spending and compare it to your budget.

7.3.2 Cash Envelopes

This low cost method is helpful for people who are visual learners and want to keep things simple.
To track your spending using cash envelopes, simply label each envelope with the appropriate expense and put the appropriate amount of money in the envelope. You may want to have two categories of envelopes; one for ―needs‖ and one for ―wants‖. When you have used up the money in an envelope, you cannot spend any more money on that expense unless you adjust your budget.

For example, if you budget $30 a month for dining out, you would put $30 in an envelope labelled ―dining out‖. If you go out for lunch three times and spend $10 each time, you would have no money left to dine out for the rest of the month. If you really wanted to go out to eat again, you would have to adjust your budget to find money in some other category that you could spend on dining out.

Important: If you use cash envelopes to manage your money, be sure you keep them in a safe place.

Needs	Wants
Rent or Mortgage	Movie with Spouse
Hydro	Swimming with Family
Groceries	Cable
Phone	Saving Account for New Couch
Gas and Insurance

7.3.3 Electronic Budget Tracking

There are hundreds of free tools available on the Internet that can help you track your expenses electronically. Your financial institution may also offer personal finance trackers that can assist you in tracking your expenses. Some of these tools are linked directly to your online banking services making this option very simple and convenient.

The most important thing to remember is to record every time you spend money—whether you are paying bills or buying a lottery ticket or paying for a fitness class—write it down. Keep track of every penny in and every penny out. Increasing your awareness of where your money goes will help you take control of your financial situation. When you are aware of what spending habits are getting you off budget, you can take corrective action to get back on track.

You may think that tracking expenses is a lot of work, but once you get into the habit, it does get easier and will become second nature. If you take the time to make a budget you owe it to yourself to stick to it. Tracking your expenses helps you to determine if your budget is working and, if it isn’t, where you need to make changes.

7.4 What to Do When You Get Off Track

If you’ve ever used a GPS to help navigate to a destination, then you know that if you take a wrong turn, a friendly voice will announce "recalculating‖. Well, that’s what you need to do if you have gone off track from your budget—you need to recalculate.

First of all, recognize that making the budget is the first step. If you’ve taken the time to make the budget, then you are off to a strong start. If you’ve gone off track, it indicates that something isn’t working and you need to reassess. Ask yourself these questions: