Wednesday, August 20, 2008

Budgeting system #2 - tracking your purchases

If you don't like the idea of the cash-based envelope system, or you want know exactly where every penny that you earn winds up, then you might want to budget the old fashioned way -- track every purchase.

Just like with the envelope system you will need to divide all of your spending into different categories and assign a weekly or monthly budget to each category.  Then either using a pen and paper or a computer, you keep track of ever dollar that comes in and every dollar that goes out.

If you use a computer program such as Quicken or Microsoft Money you can link your bank accounts, investment accounts, credit cards, mortgages, and more.  The program can then automatically download all of your transactions.  It is also often smart enough to categorize them for you.  A program like this takes a great deal (but not all) of the work out tracking your spending.

The best part of using a program like this is that you can, if you are so inclined, really analyze where your money goes.  It can show you, at the touch of a button, how much money you spend every year at McDonalds, or on yarn, or getting your haircut, or whatever else you want to know.

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