(Prosperity- Brian S Glaser) Everybody knows: to really be on top of your finances, you need to have a budget.
But knowing you need one doesn’t mean you know how to go about creating one. Ideally, a budget is not only a useful snapshot of your total financial picture, but also a roadmap for your daily, weekly, monthly and yearly spending and saving.
When my wife Eileen and I wanted to create a budget, we realized that before we could decide how much we should be spending, what we really needed to know was how much we were spending. 
On everything. Deli sandwiches, subway fares, rent…as well as the things that we don’t decide on together (yes, I knew about the boots, honey. And the other pair of boots. And I’m sorry about all the graphic novels).
So we started at the beginning: on the first day of the next month, we took out the fiscal microscope and prepared a scientific(ish) slide of our spending, which we called The Budget Project. We decided right off that TBP, as it affectionately became known in the Glaser household, meant buying as per usual—getting lunches from the nearby sushi joint, renewing those subscriptions to InStyle and Entertainment Weekly as they expired, picking up $10 bottles of wine from our favorite local merchant, bringing clothes to the cleaners—but keeping track of where each and every single cent was going.
This is harder to do honestly than you might think. The normal reaction when you’re tracking everything is to scrutinize, modify and penny-pinch. Once you're thinking about how much that medium-sized cup of Café Americano costs, it’s tempting to switch to a small serving of the Roast of the Day. But if you’re going to undertake a Budget Project of your own, you have to resist this urge. The whole point is to find out how you spend when you're going about your normal life.
At the end of the month, Eileen and I gathered up the receipts, bills, credit card statements and ticket stubs and sat down at the computer. We set up a spreadsheet, which we created by modifying one of the free templates that come bundled with Microsoft Excel. We divided our spending into broad categories—Home, Daily Living, Entertainment, Health, etc.—and made sub-category line items in each one. For example, the Entertainment category had entries for the cable bill, Netflix subscription, concert tickets and the like.
Initially, we over-thought this part, with Eileen pointing out that we go out for dinner as part of our entertainment spending, but food was in the Daily Living category. And for reasons I still can't fathom, I wanted to break out our earnings alongside taxes and benefits payments. Don’t sweat the individual line items too much—there's no right or wrong way to set it up. The important part is to divide up your spending so that you get a detailed snapshot of where the money goes each month, in a way that makes sense for you.
After we started entering our monthly info into our spreadsheet, TBP made some things instantly clear: we spent a lot more on food and drink than we'd thought, to the tune of nearly $1,000 a month. And while we had felt a little guilty splurging on a semi-deluxe trip to Canada, the vacation looked modestly priced when broken out into component parts 
(plane fare, which we got with miles; a pet sitter, who didn't charge that much per day; meals, which were minus the hotel-included breakfast each day). We also saw that my daily lunches, which came to an average of $6 a day, weren't all that extravagant (a relief since I need to get away from my desk as much as I need the sustenance), but our spending on over-the-counter items at the drug store was kind of high (sorry honey, but you’ll have to buy the generic-brand lip gloss from now on.)
The bottom line for us was that we were spending a bit less and saving a lot more than we'd predicted, tucking away about a grand a month.
In other words: we hardly knew ourselves, financially speaking. And it’s a fair guess that unless you’ve undertaken a budget project, you don’t really know your habits either. (To find out more about your spending habits and financial profile, see Finding Your Financial Personality.)
Once you've itemized and absorbed the first month's info, you can start to modify your behavior for the following month, setting limits and goals for individual categories. Each will have its own little quirks (lots of family birthday gifts in October, for example, or a trip to the vet for the cat in the spring), so you need to keep at it for four to six months and keep adding each month into the TBP spreadsheet's next column. This allows you to track both fluctuations in spending and totals, as well as the things that stay steady.
In the end, just a few months of TBP lowered the overall stress levels in the Glaser household significantly. The dream of trading in our modest apartment for a full-on house suddenly seemed totally do-able, and our nights out on the town became guilt-free (though Eileen insisted we start having dessert & tea at home instead of at the restaurant—a bigger savings than you’d think!).
Setting up your own TBP is a simple and straightforward way to step back and see which parts of your fiscal picture need a little adjusting. With the numbers laid out in front of you, it’s much simpler to create a budget that accommodates both your long-term goals and day-to-day sanity.
