If you’re in financial distress it can be overwhelming thinking about where to start to get your finances back on track. Even if you aren’t struggling, knowing where and how to start organizing your finances can be intimidating. When I look back on our financial journey, it wasn’t one giant leap into financial security. Rather it was comprised of baby steps that brought us closer and closer to financial stability.
Baby Step: Know What You Spend
If I asked you how much money you spend each month what would you say? Could you give me a specific amount or would your answer be along the lines of “Less than my paycheck” or worse “I don’t know”?
If you don’t know where your money goes every month, you can’t get your finances in order.
Where do I start?
- Download the free Monthly Budget Worksheet.
- Gather your bills and bank statements from the previous month (Note: if you’re not able to get a complete list of your expenses this way, you’ll need to track your spending in detail for one month. Save all of your receipts and carry a small notebook to record cash purchases)
- Identify other expenses you have to pay throughout the year. (Example: property tax, visits to the vet, car registration, etc.) Divide the amount by the term covered to identify your monthly cost. For example, if you pay your property tax twice a year, divide the payments by 6. If you pay your car registration once a year, divide that amount by twelve.
- Using the free Monthly Budget Worksheet list out where you spent your money.
- Be sure to capture everything you’re spending money on. You’re not doing yourself any favors by omitting costs, they’ll only come back to haunt you later.
- You can create categories such as food and utilities, but I find it helpful to break it down further, for example, food would be Groceries and Dining Out. You can break it down even further if you prefer. It will only help you out later if you need to ‘find’ money in your budget.
Now that you have a complete picture of where your money goes, how does it compare to what you earn each month? Do your expenses exceed your income? Are there any surprises? Would you make any adjustments?
On Thursday I’ll cover the next step in getting your financial house in order – Create a Budget.
Hi, I’m Cathy! I’m a former career-driven professional turned stay-at-home mom. Living on one salary has its challenges, but it is possible to live the good life while spending less. Cool to be Frugal is all about how we’re thriving, not just surviving, on a single income.
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I found that I fell short this year because I didn’t plan ahead. I will have 2 children in high school, and that means required sports camps. I am going to have to cough up about $1000 in sports camps for June/July, and I had not budgeting enough throughout the year for it. So one thing to consider is, as your kids (or you age) think of what new expenses you might have (or old ones that may go away) and plan accordingly.
So what I found, looking back was not enough. I also needed to do a better job of looking forward.
I also like to add at least an extra $100 for some unplanned expense. You and I both know that we ALWAYS have unplanned expenses!:)
My knowing what I spend was a bit different because I just cut everything out and then I was only left with basics so it was easy to work out. I didn’t look at what I could afford to lose I just got rid of everything!
My money mostly goes on rent and food now, which suits me
Nice post, looking forward to the others.
.-= Forest´s last blog ..A Pledge To Never Take Credit Again! =-.
I just started reading “Your Money or Your Life” (I know, I must be the only person in the PF universe who hasn’t yet) and that is one of the first things it tells you to do. If you aren’t conscious about your spending, you don’t know where to cut back. Being conscious leads to change. No doubt about it. Being aware is your only insurance for lasting change.
I love step by step—-Small steps can lead to large goals. Best regards, Barb
Barb Friedberg´s last [type] ..THE FINAL TALLY- “Catfight of the Personal Finance Blogger Chicks”
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