Starting and Sticking to a Budget: Step 1

These days, money is on everyone's minds.

You've got a little one on the way and you're trying to save money. You've got two kids and you want to be able to stay home or cut back your hours. You're trying to budget for day care, college savings and school trips.

Regardless of your situation, making and sticking to a budget is a great way to improve your family's financial fitness.

More than 40% of American families spend more money than they earn.  And more than 14% percent of our disposable income is spent on debt reduction these days, up from 13% in 2001. With fuel and food prices skyrocketing and the currency weakening, even "comfortable" middle-class families are feeling the pinch. What's more, less than half of all Americans use a budget, and about one in three don't know the interest rates on their credit cards, according to a survey for the National Foundation of Credit Counseling.

Despite all that gloomy news, it is possible to get out of debt and stay out of debt. How? By putting yourself on a "budget." As daunting as it may sound, making a budget is actually fairly easy. Think of it as a financial makeover--a lifestyle change that uses small steps to help you reach your goals. Sound familiar? It's the same proven system that BabyFit's healthy living programs are based on. Just as fad diets won't help you lose weight and keep it off, a strict financial "diet" doesn't work either! Getting out of debt, saving more, and just familiarizing yourself with your financial situation takes a little planning, some patience, and perseverance.

Here are five simple steps to making a budget (and sticking to it!)

1. Keep a spending log
For one month, write down everything you spend. (Our printable Spending Log makes it easy.) Keep track of all purchases, from the $3.25 you spend on a latte, to the $175 you pay for your son's school trip, to the mortgage and utility payments you make each month. Ask your partner and children to do the same. Even grade-school children can benefit from learning about managing money.

This task serves two purposes: 1) It holds you accountable for every purchase. 2) If you have to record each purchase, you will think twice before making impulse purchases.

When logging your purchases, make sure you're specific. If you write "$52.17 at Wal-Mart," that doesn't tell you what you bought. Pull out those receipts you usually ignore and break down the purchases. Soon, that $52.18 at Wal-Mart becomes $11.95 for health care, $33.24 on groceries, and $6.99 on education (school supplies for your daughter's science project). Write down the small stuff. Candy bars might cost just 65 cents, but if you buy three a week, that's $101.40 a year!

Sample Spending Log

Date	Place	What did I buy?	Category/Reason	$ Amount
1/1	Grocery	1 week of groceries	Food	$150.52
1/3	Pharmacy	Prescriptions	Healthcare	$10.07
1/5	Wal-Mart	Vitamins	Healthcare	$11.95
1/5	Wal-Mart	Groceries (lunch snacks, milk, eggs)	Food	$33.24
1/5	Wal-Mart	Art supplies for school project	Kids/Education	$6.99

If you can't remember how much you spent, guess. Don't leave off your gas purchase because you can't recall the exact amount. It's better to estimate than omit.

After the month is over, examine your spending and categorize your expenses: housing, utilities, food, transportation, clothing, medical/health, entertainment, debts, savings, and other. You should also examine which members of your family are responsible for which expenses.

Do you notice any trends? Are you making more "extra" purchases just after payday? Do you rely on credit cards more at the end of the month? How are your children spending their allowances? How much are you and your partner spending on lunch each day?

Extra credit: Separately track purchases you didn't make. Print off a second Spending Log to track purchases you wanted to-but didn't-make. The new CD you got from the library instead of the mall ($15), the drive-through meal you skipped for a meal at home ($15 for all four of you), and the shoes you tried on (but didn't buy) at the department store ($45) are technically money saved. Though it doesn't increase your bottom line, it doesn't decrease you bank account balance either. If you had bought all three of the items above, you'd be out $75!

Keep reading! Starting and Sticking to a Budget - Step 2

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About The Author

Stepfanie Romine A former newspaper reporter, Stepfanie now writes about nutrition, health and fitness, with an emphasis on whole foods and from-scratch cooking. She is a certified Ashtanga yoga teacher who enjoys Spinning, international travel and vegetables of all kinds. See all of Stepfanie's articles.