Tracking your actual costs

With your first pass of your budget in place, now lets start tracking your actual income and expenses.  There is no right way to do this.  Try to find a way that is easy for you.  Some people like to be very detailed oriented and others maybe not so much.  I believe that no matter how you track your income and expenses, make sure you are consistent.  If you are very detailed and separate out your groceries, household items, fuel, etc. then make sure you do that every month.  If you are consistent, then you will get a very good picture as to how much your are spending and in which categories.

If you are someone who likes to be detailed but just don't have the time, there are ways to achieve this.  There is software available to help make this easy.  The popular types of software include QuickBooks, Quicken, and Microsoft Money.  For example, if you have a version of the software that I mentioned and have a major credit card, it is very likely that you could download your statements into the software.  These types of software also have the capapbility of downloading your bank statement from your bank account.  There may be a fee for this functionality but it is very convenient.  This is an easy way to understand your spending habits and allows you analyze your cash outflows.

Using this software is very nice, however, if you don't heavily use a credit card or are working to limit your credit card usage, here are a couple more suggestions:

1.  Envelope Method - Take a series of envelopes and label them with your major expenses such as groceries, fuel, eating out, entertainment, household expenditures, etc.  At the beginning of each month, with cash from your bank account and put in the budgeted amounts into each envelope.  This is how much money you have for the month and once the money is gone, you can't spend any more cash.
2.  Bank Reconciliation Method - Reconcile your bank account with your monthly habits.  On a monthly basis, reconcile your check book to your bank statement.  This will give you a running total as to how much money you have in your checking account.  Make sure you also track your expenses based on your budget so you don't over spend.
3.  Excel Method - If you like working in excel, this could be a very convenient method.  I have created an excel budgeting template that you are welcomed to use.  You can customize it however you would like.  With the template that I have created, simply input your budget and track your expenses.  There are formulas in place to track how well your actuals compare to your monthly budgeted amounts and how well you are trending for the year.  This is will tell you exactly how much you have leftover on a monthly basis.