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Budgeting: Keeping a Spending Log, or Keeping Track of Your Expenses

Provided by the International Finance Corporation


If you can fill in the blanks, you can complete a budget worksheet.  However, it is important that the blanks you fill in are accurate.  If you guess, without a real sense of where your money is going, doing a budget is a waste of time.  People tend to guess when they don’t know what amount to put in the blank. 

To have a more accurate idea of where your money is going, you need to fill out an estimated spending budget sheet at the beginning of the month and then compare it with your actual spending at the end of the month.  This is a difficult assignment for most people since they usually have no idea what they spend in certain categories like groceries, meals out, entertainment, or clothing.  Therefore, their estimated budget tends to vary greatly from their actual spending. 

There are two kinds of expenses… those that we know and those that we don’t.  The expenses that we know are predictable ones like rent/ mortgage or your car payment.  They don’t fluctuate from one month to another.  It is the expenses that continually change that are difficult to quantify.  Since we don’t receive a bill in the mail each month that says “groceries” with a set dollar amount, it is hard to know for certain what you actually spend. 

The only way to determine an accurate estimate of these “unknown” expenses is to keep a daily log for a short period (a month is best) to find out the real cost of fluctuating expenses.  It is necessary to write down the amount and the type of purchase.  This includes even small sums like cigarettes or coffee in the morning.  Once you have calculated the total expenditures for each category at the end of the month, then you can enter these amounts into your post-month budget.  If you compare your pre-month budget with your post, you will probably discover that you have underestimated.  Most people think they spend less than they actually do.   

Until you know the reality of your situation, you will have no reason to make any adjustments in your spending routine.  If you think you are spending frugally when in fact you are spending as if you had just won a game show, you will need to revise your expectations downward.  Since there is a finite amount of money to spend each month, you need to make choices as to where you will spend it.  Knowing where your money really goes will help you to make these difficult choices.  

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