Ready to answer that question: Where does all my monaaaay go?
Before I start on my personal methods for tracking my own money–which my friends have deemed “old school” because of the fact that it’s done with pen, paper and excel…I should mention some fantastic online resources. I personally enjoy doing my budgeting by hand because I believe it allows me greater control. However, I will admit it is more time consuming than using the online resources. I would definitely recommend looking up these websites:
– Mint.com allows you to input your checking & savings account and automatically categorizes and tracks your spending
– You can see your spending as a percentage by category each month
– You can set how much you spend along with email or text alerts if you spend more than your set budget
– Learnvest has great user stories about how they manage their money
– Learnvest also has a great personal finance tracker
– It also categorizes your money and allows you to see your spending monthly
Now, for how I personally look at my spending…
Step 1: Collect your Financial Statements
Collect your financial statements over the past month (or past 3 months if you want to be complete). I typically use credit or debit so I was able to see all of my purchases in past statements. If you typically use cash, try to use old receipts or any other records.
Step 2: Choose Common Categories for your Spending
I made this handy-dandy list of common spending categories. Check off your categories and add some if needed!
Step 3: Do the Math
a. Find Average Monthly Spending: Add in your purchases for each category
b. Calculate: Spending as Percent of Income.
Here’s the math:
(Expense in that category/monthly take home income) * 100 = Percent of your income spent
Here’s an example:
Step 4: Answer the MadLibs
Step 5: Highlight Categories You Want to Cut
Now you ask the question: “Am I spending my money the way I want to be?” Our spending habits should reflect what we value. For instance, if you value travel alot, but spend most of your money on beer, your spending would not be reflecting your priorities. So, look at your categories and just highlight the sections you think you could cut. You don’t have to decide how much right now–that will be done in the second half of our DIY Budgeting series.
Step 6: Take a Break, Breath a Sigh of Relief