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Spending books can help you save

Budgets can be intimidating and inflexible. A better way to start saving is with spending books, which can be easily customized for your spending situation.

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    Brian Jones, CFP. is with Cooper, Jones & McLeland, Inc., a leading provider of financial planning services in Fairfax, Virginia. A financial planner may also be able to recommend other saving tips.
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You know you need to create a monthly budget for your household. But before you can do that, you need to create a spending book, which is a book that tracks how much you spend each week on everything from groceries to gas to bus fare.

If you don't know how much you already spend on these items, you'll struggle to craft an accurate budget for your household. And with an inaccurate budget, the odds are high that you'll bust it before the end of every month.

Fortunately, creating a spending book is simple. You can do it in less than two hours, and you'll need just a pen and a notebook.

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The Problem With Budgets

You might set aside $600 a month for groceries. By the time the month ends, though, you've spent $900 at the supermarket. What happened? You set an unrealistic budget goal.

This isn't unusual. In a study released earlier this year, Bankrate reported that 82% of U.S. adults say they keep a budget. But the same survey found that fewer than 40% of respondents had enough savings on hand to cover a $500 or $1,000 emergency bill.

A survey by HarrisPoll for SunTrust Banks released earlier this year found that 44% of people who earned more than $75,000 a year said that their extra spending on lifestyle purchases — purchases that were not essential — prevented them from saving as much money as they wanted to. The survey found, too, that almost one-third of respondents were living paycheck to paycheck, not saving any money each month.

These are the kind of financial problems people run into when they break their monthly household budgets.

How a Spending Book Can Help

It's easy to know how much you'll spend on your mortgage, student-loan, or car payment. Those expenses don't change each month. It's easy, too, to guesstimate how much you'll spend each month on your electric and gas bills. They vary each month, but not wildly.

How much you spend on groceries, dining out, movies or public transportation, however, can change from week to week. When you break your budget by overspending on these discretionary purchases, you're likely to dip into the money that you've budgeted for savings. And that's how you get to the point where an emergency bill sends your credit card debt soaring.

This is why it's important to create a spending book to track all of your purchases. Once you do this, you'll have a better ballpark figure on how much to budget for entertainment, restaurant meals and groceries each month. And you'll be less likely to break your budget.

Creating Your Spending Book

The best way to create a spending book is to go tech-free. Buy a small notebook that you can carry with you. When you make a purchase, no matter what it is, write it down. If you don't want to carry your notebook with you, get a receipt for your buys. When you get home, write down what you bought during the day.

Make sure to write down, too, when you pay your mortgage, car payment, credit-card payment or utility bills. You want to chart all of your purchases in your spending book every day. It's the only way to get an accurate representation of how much you really spend.

Apps for That

If you'd rather go a bit more high-tech, you can download several apps that help you track your spending. You'll just enter your purchases into your smartphone after you make them. There are plenty of tracking apps out there, but some highly rated ones areTrackMySPENDGoodBudgetPennies, and Pocket Expense.

Sort It and Add It Up

At the end of every week, enter the purchases from your spending book into a spreadsheet devoted to your household spending. A simple spreadsheet will work fine for this. You can also search online for spreadsheets created just for this purpose. You'll need to organize your spending into broad categories. Choose what works for you, but you might consider breaking your purchases down into categories such as household expenses — which would include money spent on maintenance and repairs, utilities, and your mortgage payment — entertainment, groceries, clothing, medical expenses, dining out, transportation, and monthly subscriptions.

Once you have your information in a spreadsheet, you can total your purchases in each category to see what you've actually spent on going to the movies or on medical visits.

Do It for a Month — That's It!

You should keep your spending book for at least a month before creating a household budget. That way, you'll have enough spending data to account for the weeks in which you spend less or more on such variable purchases as groceries or dining out. Once you have a month's worth of numbers, you can average out how much you typically spend on these purchases.

Armed with this information, you can create a household budget that's actually accurate. You should keep that spending book going, too, even after your budget is set. It's a great way to determine if you're on track to meet your budget goals as the month moves along.

This article first appeared at Wise Bread.

The Christian Science Monitor has assembled a diverse group of the best personal finance bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link in the blog description box above.

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