Track the Spending

Do you know where all your money goes?  Or does the paycheck come and go, leaving you wondering what happened?  The best way to get control of your money is to make a monthly written plan of where you are going to spend all of it, before you get paid.  Dave Ramsey calls this living on a zero based budget.  All the money in, minus all the money out, equals zero.  If you have a partner, you need to do this together.

People always ask, “what if I don’t know what is going to happen?”  The written plan can be flexible.  Here are some pointers 

• Pull out your calendar when budgeting:  Check for birthdays, oil changes, and other non-monthly items that may be coming up in the next 30 days. 

• Divide other non-monthly items by 12 and start putting cash aside for those due dates.  This is good for car tags, insurances, house taxes, quarterly bills and holidays. 

• Make sure you allocate some money into an emergency fund.  Dave recommends building up $1,000 starter emergency fund.  After all the non-mortgage debt is paid off, that can be increased to 3-6 months of expenses.

Before we started this program, we had no savings.  Now, I always keep 1-2 co-pays in an account and some money for minor car repairs in addition to our starter emergency fund.  The peace of mind is empowering!

If this seems way too hard, try tracking where every cent goes for a month.  The book Your Money or Your Life goes into great depth about tracking your spending.  There are many ways to do this from checkbook software to carrying a small spending journal with you.  Either way, keep a detailed record for a month.  At the end of the month, group expenses into categories.  You may be surprised!   Sometimes little expenses you don’t think much of, happen often enough to add up.  Look at each category and ask yourself some questions. 

Can I cut back?

Do I need this?

Did this purchase bring me fulfillment?

This makes it easier to see spending patterns and rerout them into more productive channels.  The next month you will have more confidence to create the written plan before you get paid! Knowledge really is power.  The longer you stay in the dark about the whereabouts of your spending, the longer it will take you to prosper.  Let me know how it is going for you!