Where Does My Money Go?
| Many people live paycheck to paycheck, even if they seem to be making good money. If you worry about money it can put a major strain on you and cause stress and conflict on your life. Have you done an analysis to determine how your money is spent? Once you can see your spending habits then you can make adjustments to decrease spending, reduce debt and increase savings. Have all family members make suggestions on how to decrease spending. Meet on a regular basis to help everyone in your family understand where you are spending your family is spending its dollars. This is a great opportunity to teach children about the rewards of saving money. You need to start by analyzing the current situation. For one month, have all family members track their spending. Each person should use a notebook to list personal expenses. Categorize expenses into meals/food, gas/transportation, entertainment, clothing, etc. Keep all your receipts, bills and records. It may help to distinguish between fixed and variable expenses. Fixed expenses are constant and are sometimes based on a contract. They may be paid monthly (rent, loans, mortgage, car payment), quarterly, semiannually or annually (property taxes, insurance, tuition). List all of these types of expenses that you have:
Variable expenses can’t be predicted as accurately and include necessities like groceries and electricity, occasional expenses like clothing or eyeglasses and sudden, unpredictable expenses like car repairs or emergency medical bills.
Write down your best estimate of your fixed and variable expenses. Add up what you spend in each category over the year and then divide the amount by twelve to get a monthly average. Set aside each month the amount needed for those items like property tax or insurance bills that are due quarterly or annually. After you find out WHERE YOU ARE in terms of your budget, decide where you want to go. Are you trying to save money, reduce debt and stop deficit spending (cut expenses in order to have money left at the end of the month)? You need to start by spending less than you make. Set both short term and long term goals. If you are living beyond your means or want to save more each month, take a hard look at your expenses. What can you cut? Are you spending more in one category than you thought? Can you use your savings to pay down high interest debt, being sure to leave some money for emergencies? Can you switch to a lower interest rate credit card? Reduce, or better yet, eliminate your access to credit. Cut up your credit cards or freeze them in a block of ice. Look for the best value when you shop. Buy in bulk if you can. Eat out more frugally. Do small fixes around the house yourself. Shop with a list and stick to it. Increase you insurance deductible. Reduce entertainment expenses. Cut back on convenience store purchases. Drop premium cable channels. Cut back on cell phone service. Cancel a rarely read magazine subscription. Set the thermostat three degrees cooler. Install a programmable thermostat to adjust the temperature while everyone is out of the house. There are good websites out there where you can keep your budget on the computer. Try www.quickenonline.com www.mint.com www.geezeo.com. I personally have used Quicken for probably 20 years and I love it and don’t want to change at this point. I have however checked out mint and geezeo and they look very good and have good ratings from the finance magazines. I believe in “what gets measured gets improved” which I have talked about in my blog. I think putting things down on paper (on in the computer) helps you to measure where you are at. And when you measure things they improve. |
Personal Finance and Wellness