I borrowed The Complete Tightwad Gazette by Amy Dacyczyn from my local library a while back because I’d read so much about it on other personal finance blogs. I started reading through it, and I found so many good tips and ideas that I decided to buy a copy for myself from Amazon. This post is the first in a series where I’ll share my take on some of my favorite tips from the book.
Track Your Spending for 3 Months
One of the first tips you’ll find in the book (on page 9, in fact) is to track your spending for 3 months. Amy says the first step for anyone who’s looking to become more frugal is to find out where your money is going now. I agree with her. It’s hard to know where you should start looking to save money if you’re not sure what you’re spending it on.
By taking the time to track all of your expenses, you’ll learn two things. First, you can categorize your expenses into essentials (needs) and non-essentials (wants). Breaking things down this way will help you see where you can make room in your spending.
Second, you’ll see just how much you’re spending on your budget categories. Knowing this helps you target the biggest expenses to get the most impact. It will also make you more aware of where your money is going. Blind spending is a quick way to destroy your finances.
How to Do It
So if you want to track your spending, what are your options? Here are some ideas:
- Paper – You can always do it by hand with pencil and paper. This is a time intensive method and makes it difficult to work with the data you collect. I wouldn’t recommend this method.
- Spreadsheet – Microsoft Excel, Open Office Calc, Google Spreadsheets, or Zoho Spreadsheets can be also be used to track your expenses. This is another manual method that takes a bit of time, but at least you can sort and use your data. If you’re not dedicated to routinely entering your expenses, it won’t work for you.
- Budgeting Software – Three of the best software choices for budgeting and tracking expenses are Quicken, You Need a Budget, and Gnu Cash. The advantage of these programs is that they store all the information on your computer, and they can automatically download your transactions from your banks and credit cards. They also offer more advanced reports than you’ll want to create in a spreadsheet. This is a much easier solution than the first two.
- Online Budgeting Websites – There are multiple options if you’re interested in using an online budgeting website. Mint, Thrive, Wesabe, and Yodlee all offer a free, online solution for budgeting and tracking your spending. You might not be able to use these sites if you bank at a credit union or small local bank, and you might be concerned about security issues with having all your info in one place. Security was my initial concern, but I did some research and decided to go with Mint. I like it so far, and I’d recommend you read their FAQ if you’re interested. This is by far the easiest solution. It only took me about an hour to set it all up the way I wanted.
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If you want some more good ideas on saving money from The Complete Tightwad Gazette, make sure you sign up for free updates from Provident Planning. I write on a wide variety of personal finance topics, so even if you’re not interested in frugality I’m sure you’ll find something useful here.