Get up close and personal with your finances

EVERY SO OFTEN, my husband and I review our finances and revise our goals. We dig deep into the numbers, often resulting in a reduction in our spending, an increase in our savings or both. Sometimes things are going so well that no changes are needed.

With our current work schedules, the start of a new school year and volunteer ministry work, we haven't been able to complete our budget re-examination process, which takes several hours.

As we live in this incomplete state of analysis, I've been uneasy because I always like to have a current bird's-eye view of our finances.

So when people tell me it's hard to budget, I get it. I understand that budgeting can take a back seat to life. Or maybe you've never felt you needed a written budget. But then life happens, which was the case with this reader:

"Over decades, our alternative to a household budget has been to not spend money whenever possible, which has worked out OK. But now we are making less income and maybe need to get scientific, but can't stand the thought of writing down every penny we spend over the next two months as the first step in creating a budget. Can you suggest something easier?"

After reading the question, I immediately thought of Kermit the Frog and his signature lyric, "It's not easy being green."

Our financial lives are not easy. We could wonder what it's like to be something we are not - multimillionaires who don't have to keep a spending journal. We could - and many do, kind of, sort of - think things are going OK financially.

But as I often tell folks, your financial life might appear to be good until it's not. And it's at that point you realize how quickly things can go bad because you didn't know your true financial picture.

So, no, I don't know of an easier way to budget other than the painstaking, time-consuming, mind-numbing and frustrating process of getting up close and personal with your numbers.

I do, however, have some suggestions on how to get started on a household budget:

Gather everything. Know where you stand before you put together a plan.

Your budget process should start with pulling together your financial statements from the previous year. With a 12-month look back at your bank statements, for example, you can see patterns. At the start of the school year, we tend to eat out more because we are rushing to back-to-school meetings or various sports activities. In the summer, our grocery bill goes up because the kids are home from school and want to eat every hour. (How do they get through a school day with just lunch?)

Get some colored highlighters so you can comb through the statements to identify spending patterns you may want to change or at least plan for.

Also, when you pull together all your account information, including your credit-card statements, you can ferret out the falsehoods you tell yourself such as "I don't really eat out a lot" or "I don't shop that much." The numbers don't lie.

Prepare a net-worth statement. Know what you own and what you owe.

I recommend that you prepare and mull over your net-worth statement before you create your budget.

Why start with this document?

It's like viewing your home on Google Earth. You can see all of your property. With this satellite view of your financial house, you can look beyond your month-to-month operations and set long-term goals for where you want to be.

List all your assets and liabilities. The difference between what you own and what you owe will either produce a negative or positive number. If you have a negative or low net worth, what can you do to increase your assets, decrease your liabilities or both? That's where the budget comes in. You're budgeting not just to make sure there's enough to pay your bills but also to build a stronger foundation.

Write it down. You can't change what you don't see.

Create a spreadsheet, use a notepad, buy budget software, I don't really care. Just put your budget in writing. My husband and I use an Excel spreadsheet and set up a projector and screen in our dining room to make it easier to go over the numbers together.

Create a spending journal. You can't move forward unless you look back.

Once you've created your budget, spend a month recording every penny you spend. Upon review, you may be surprised at how much money you waste.

It's not easy to budget, but if you do, you'll appreciate all the green you'll be able to see and save.