Are you ready for this? Are you sure? The one thing financial gurus, blogs, talk show hosts, authors and billionaires all agree is the most important step to being financially independent (and certainly to being rich). If you do this for 2 months you will blow yourself away. Here it is………..
TRACK EVERY DOLLAR YOU SPEND!
(for at least 2 months)
- You can’t fix it if you don’t know it’s broken – I started doing this last summer and within the 1st 2 months realized I was spending more than 25% of my food budget on ice cream!! 25%!!!!! Ice cream!! I like ice cream (obviously) but I like having the money to do whatever the heck I want more. Needless to say, I now think twice before making a Ben & Jerry’s run with friends.
- You’re likely to spend less money. – 1. Because you’ll be more aware of your spending ($5 of my hard earned money on a crappy magazine? I don’t think so.) and 2. Because keeping track of your spending is a pain in the butt. (I all but stopped buy gum at convenience stores when I started keeping track of my spending because recording it was annoying. Now, I buy gum in bulk when I go grocery shopping – which is cheaper than buying a pack at a time anyway.)
Create a log that’s convenient for you (the key goal here is that you use it, so keep it simple)
- Microsoft Excel Spreadsheets – This is how I do it. I like this because it’s simple and makes it easy to divide the money I spend into categories. Also, seeing it on my desktop while I’m wasting time stumbling around online reminds me to fill it in. To get a free sample templates of how I organize tracking my expenses, email me at email@example.com.
- By hand – A moleskine or other small notebook works well and is portable. I’d suggest coming up with 5 or fewer categories and for each month, labeling the top of 5 consecutive pages w/ your categories (i.e. Pg.1 – Transportation, Pg. 2 – Rent + Utilities, Pg. 3 – Entertainment, etc…)
- Online – For technology geeks out there, Quicken now offers its software for free online. I’d recommend this only if you feel comfortable using it and are likely to stick with it.
- Fill it in at least every few days – if you wait any longer you’ll forget what you bought
- Use your debit card -that way you can check what you remember buying against the online log of debit card transactions (Note: Looking at your account online does not substitute for tracking it on your own. It’s not divided by categories so you won’t see your spending patterns as clearly)
- Make it part of your procrastination routine – We all waste time on trivial things (facebook, twitter, etc..). Why not spend a couple minutes updating your budget whenever you’re tempted to check the facebook status of that kid you went to 3rd grade with? Hey, whatever works.
- Be Honest . – The goal is to “track your spending” not “track your spending on things that you’re proud to spend money on” If you spend $80 at Fuzzy’s Liquor store, that needs to go in your record (although maybe not in your next letter home). Remember: this is for your benefit and your eyes only. Be honest.
- Include everything. -Example Categories: Food (Groceries, Eating Out), Transportation (car payments, bus pass, gas), Housing (rent, utilities – gas, water, electric, phone, internet), Entertainment, Insurance, Financials (student debt, credit card payments), Health/Beauty (clothes, gym membership, toiletries), Pets, Misc
GOOD LUCK!!! Email me and let me know how it’s going at firstname.lastname@example.org