the first step to creating a personal budget is also the most important…

I read a lot of articles about personal finance with titles like, “The top 5 Money Saving Tips”, or “Finance 101: How to create a budget” or “Stuck in a money crunch? Follow these 10 steps for a Personal budget”.

Most of the articles provide really great advice. They talk about what steps to take, strategies to implement and how to create goals for yourself. I think for the average person, it is really difficult to create and maintain a budget. Whether it is how they were raised or fear of numbers, most people are not comfortable managing their own money in a proactive manner. These sites really do seem helpful.

With all that being said, in my personal experience/opinion, there is one area that I believe is grossly overlooked in every self-help personal budget I come across. And that is summed up with one question. How do you know what direction you should be going if you don’t know where you are today? Stated differently, where do you spend your money today? The easy expenses are always the items we gravitate towards first. “Oh, my car note is $300, rent is $1000, cable/cell/internet is another $150…” and etc. Fair enough. I always believe the devil is in the details…

How much did you spend on groceries last year? What about restaurants (yes that daily Starbucks trip too)? Hmm, better yet, how about those annoying items like oil changes and new tires? Don’t forget about birthdays, holidays and gifts every year.

Pretty tricky to manage right?

This is no easy task. It’s the hardest part of budgeting but also the most critical. My advice is to accurately track every penny spent (at least) once every 3 months. At this granular level of “tracking”, it is not a matter of ensuring you capture all the dollars spent (although that is still very important); it is that you will actually start to correlate your decision making with their financial impacts. This is the best way to change spending behavior. Too often people do not connect their many small decisions with the impact on their overall financial picture. Doing this “tracking” helps connect the dots.

But guess what? I have not mentioned one word about planning. During this time of getting familiar with your current spending, DO NOT PLAN. Become accustomed to tracking where your money is being spent. Do nothing else. Crawl first, walk later. (Now of course, if you are filing for bankruptcy and the bank is foreclosing on your house, obviously this message is not meant for you. Sorry.)

The very first month I got serious about tracking my personal spending, I was utterly shocked at the amount of money I spent on food, video games, and well… crap. I was spending almost 1/3 of my paycheck on groceries and eating out. Do not get me wrong, I really enjoy food and drinks with friends in social settings. But wow, I never realized I dedicated so much of my money this way. But once I started tracking my spending, I could slowly start to see how my decisions (i.e. going out to pint night at Taco Mac every Thursday) were impacting my overall ability to save money.

You must know where you spend your money. Down to the damn penny. That sounds excessive, but with today’s tools you really have no excuse unless your personal mantra is “ignorance is bliss”. Balancing check books is lame even for a numbers lackey like myself. There are some awesome, free tools out there. is one of the best free financial planning/consolidation tool out there. What aims to do is consolidate all your financial accounts into one snapshot. (I’m a stickler about privacy and passes the sniff test on that front as well. Otherwise, I would not use them.) They can pull transactions from your bank accounts, debit card, credit card and even loans and investments. They even go one step further and take a best guess on the nature of the transaction and put it in a category for you. So a credit card transaction to “Gas South” will automatically be marked as “Gas Bill” which is a sub-category under “Bills and Utilities”. These transactions all get labeled and consolidated into a pretty summary for you. (They do awesome budgets and goals too.)

BOOM!! Now you can be ashamed of all the naughty spending habits you always knew you had but were too afraid to confront. Give it some time and start tracking. Congratulations, you are now on your way to financial independence. If I can keep up on my goals for this year (which includes blogging consistently), I will be following up with some helpful next steps to a personal budget. Look out!


You may be thinking, “Well hey, you’re a financial analyst, no wonder this comes easy to you!”. This is partly true. My professional background and experience forces me to be more attuned to these things than the average person. But you are kidding yourself if you think professionals in the accounting and finance industry (myself included) do not have “money problems.” For example, I believe it is way more dangerous that I know exactly how much money I spend and I eventually become numb to those figures since I deal with large sums of money on a daily basis. I am still a normal dude (most of the time) compelled by the same desires as anyone else.

In case you do not know anything about me yet, I work with numbers on a daily basis. I analyze, budget, manipulate and streamline all sorts of data (I even do fun projects on the side like this one). Typically that involves pushing around Benjamin’s in a spreadsheet for the company I work for. So I try to read everything and anything dealing with finance that I can get my hands on (personal, banking whatever)

This does not by any means make me an expert on personal finance. As a matter of fact, let me go ahead and state this explicitly: you should not, by any means, ever take information I may, or may not, directly present in this blog post, or any blog post, as financial advice. I doubt my advice would bankrupt you; however if you do go bankrupt or have some ill-fortune, it’s your own fault. I am merely speaking from my own personal observations and experiences. And yes, I sound like an annoying brat who is trying to mitigate some imagined liability. Yes I am that guy. See you next time.