Learning to budget is more than mentally allotting spending limits. Tracking monthly expenses and budgeting is a change in habit that takes discipline and dedication. Once you learn the habit of tracking your money, you will stop wondering “where did my money go?” and realize that you have more in your savings account than every before. While it takes time to be a good money manager, it is well worth the effort for your checkbook and for your financial freedom.

1. Know how much you bring in every month. Write down every dollar that you bring in per month from your paycheck, dividends, extra work, etc. Anything that you can count on should be written down.

2. Find out when your bills are due. This is one of the biggest problems I see with my financial counseling customers. They don’t know when their bills are due – whether the first or 15th of the month, and sometimes they schedule their payments when they have no money (like on the 28th of the month), or they schedule them all between the 1st and the 15th. With automatic bill pay, some people don’t know when their bills are due or when the money comes out. There is just that sudden surprise of a recently depleted bank account when someone thought they had more money than they really did. This is a mental disconnect from your money that is the root of budgeting problems. Get all of your bills, write down the due dates on a big calendar that you see everyday or set up recurring reminders, and try to balance out when they are due.

3. Keep receipts and analyze. For the next two to three months, keep every single receipt and keep it somewhere safe and handy or use a budgeting app for iPhone, Blackberry, or whatever hand held device you have. Even just adding in expenses in the notes section of a cell phone, or having a notebook will do. Once a few months of tracking are over, go through the receipts and understand where your money is going. Really sit down and figure out where you can cut back. One of the biggest eye openers are those little daily expenses that add up over time. For example, a daily latte at $4 will cost an average of $100 per month (I use this example constantly, because lattes are my guilty pleasure).

4. Use online tools or buy budgeting software. There are a lot of really good online tools available for budgeting. Mint.com allows you to set budget limits, will keep all of your accounts – checking, savings, portfolios, credit cards, etc. – in one place. If you are reaching a low balance on your bank account, they will send an alert. If you have overspent in one aspect of your budget, they let you know that too. There are also budgeting applications for your computer and cell phones. Anytime you make a purchase, you can log it into your phone, and or log it onto your computer.  (another reason to keep receipts!) Customers of Chase Bank, USAA, Bank of America and many others can subscribe to email or text notifications when your balance is low, when a check is cleared or a deposit has been made.

5. Allow room for success. If you make a budget that is too restrictive and it makes it impossible for you to succeed, its time to reevaluate that budget.  You may have unrealistic goals, like saving $300 every month, when you have an almost break even lifestyle. Aim lower, maybe $50. If you are committed to making life changes, then you will see where you can cut back a bit more and add to your monthly savings.