Getting a Grip on Finances

 Simply put, we need to have an accurate picture of money coming in, and money going out. We need to get a good assessment of what we earn, and what we spend. Knowing what we earn is generally easier - we know our hourly wage, our salary, or have an average of our income if it fluctuates. Get a piece of paper and write down all of your monthly income sources, and label that "Income":

This is based on a biweekly paycheck, earning $17/hr after taxes. Your amounts and situation will vary, but you want to get a good idea of how much you earn in a given month.

Next, on the other side, list your expenses I start with the "4 walls" - basically everything you need to survive. Housing, electricity, food, transportation, etc:

Not bad, right? We have a $741 dollar difference! Well, not quite. Now we have to think about are "True Expenses". True expenses are basically *everything* we spend money on. Insurance, dining out, movie tickets, Dr Visit co-pays, vet fees, subscription services, gym membership, etc. You get the idea.

To get a good (sometimes shocking) picture of your true expenses, log on to your bank, and get 3 months worth of transactions, and print it out, if you can - it's easier to review if it's not just on a screen. Go through each transaction, line by line, and see where your money went. Write down each expense in it's own category, as appropriate - concert & movie tickets can go into "entertainment", Starbucks, Brewpub visits, and late night fast-food stops can go into "Dining Out". You can get as broad or as granular as you like, but for starting out I suggest the simpler the better.

But we're still not done. There's nothing there for Dr visits. There's nothing there for that oil change I'll need next month. There's nothing there for my car registration, due in 7 months. And, I'm already over budget!

Don't worry. At least we have a better picture of where our money was going.

We can see that we have some credit card debt, a gym membership we never use, and some streaming services we may not really need. This is where we give thought to what's important to us. What are our priorities? Do we like Netflix more than eating out? Can we work from home part of the time to spend less gas during the week, or carpool, or take public transit?

Think long and hard about what you really want your money to do. Do you want to travel? You'll need to save up for that vacation. Do you have a hobby, or hobbies you enjoy? You'll need money for that. Like to spend a lot on others during the holidays, or have some charities you want to contribute to? You'll need to allocate the funds for that as well.

We'll take a look at everything in the next post, called "Embracing your expenses".









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