While being young, broke and beautiful is all well and good, some people’s finances are more jacked than others. That’s why we’ve invited Betsy Crouch (aka Coach $izzle) to come onboard and dole out some much needed advice. She is a professional financial coach after all. If you’ve got a question you’d like answered please email her at. Maybe your question will be the next one answered.
This week it is my turn to ask the questions…
Do you know the total of your monthly expenses?
Do you know where your money is going?
Before you start to think about creating a spending plan, debt payment plan, and/or savings plan, it is critical to know where your money is currently going. It is hard to look at it sometimes, and most people are surprised to see how much they spend in certain areas.
Once people look at their spending they typically realize that their perceptions about their spending is way off.
The service my company provides is basic bookkeeping and financial coaching. We create a profit and loss report and a personal expense report for our clients, who are typically independent contractors. Blabidy blah, they use the report we create as their tax preparation for their itemized expenses. New clients are always shocked at how much they spend on some personal expense category on the report. Sometimes people are paying for things they didn’t realize they were paying for, an old bill or something they thought they cancelled, usually something under $15.00, so it slips under the radar.
Ok, so outside of spending over $165 per month for financial coaching and basic bookkeeping, or using an expensive and complex software system, what are some FREE things you can you do to track your expenses and to become aware of your spending?
1. Write down everything you spend money on for two weeks.
This recommendation comes from a fantastic book about taking the reigns of your financial life, called Your money or Your life, by Vicky Robin and Joe Dominguez. The site associated with the book is www.yourmoneyoryourlife.org, check it out. You will quickly see where your money is going and most people create some shifts in habits after doing this exercise. That $5 each day for ___ really adds up, maybe you could make it at home, or buy it in bulk?
2. Use www.mint.com.
Mint.com is a web-based FREE personal finance software tool. It is FREE, and is a great introduction to tracking your personal expenses. To use mint.com you set up an account and you enter all the online banking information for all of your credit cards and bank accounts, this allows mint.com to pull your latest transactions from your online banking, and start to put together a picture of what your spending is like. You then go in and select the category each expense should be listed under. You can click a box that lets the system know that every time you write a check to Bartholomew Jones that it is for your Personal Rent, etc. You can then start to check in and see how much you are spending where.
Is it safe? Yes it is safe and secure, read this section on safety from their site.
Other reasons mint.com is awesome: easy budgeting, sweet graphs, suggestions on how to save money (through paid advertising from companies who want to vie for your business, this section is not overbearing), mobile access, iphone app, and last but not least you can set up text alerts to let you know if your account balance in your checking account is low, or if you are over your self imposed spending limit in a certain category.
Finally, you can compare your spending in a specific category like dining to the average person in your city and other cities. You may find that you are being really smart and frugal compared to the other people in your city. If so, give yourself a pat on the back. If you find you are spending a slap ton more than others in your city, you need to get Stuart’s book and work on increasing the awesomeness factor and lower the expense for it.
See where your money is going, and ask yourself, does my spending and saving align with my priorities? Do you know what your priorities are? Check back next week for tips on how to gain clarity about your personal financial priorities!
Comments / Questions?