Getting started with your personal finances is simple.
The first thing you need to do is make sure you’re spending less than you make! If you do this, then you have already conquered a large part of the battle to becoming financially confident.
However, Achieving this right out of the gates can be difficult if you do not have complete visibility to where your money is going.
I’m sure you remember the day you received your first job offer and how secure you felt knowing that you would have a steady stream of income at your fingertips. Like many of you, when I got my first offer, I felt at ease knowing that I wouldn’t have to stress about money right out of college. And like many times before, I was dead wrong with this assumption!
It’s incredibly easy for us to write out rent, utility, and cable checks without blinking an eye. Plus, if you are someone that uses a credit card, you understand how impulsive it can be to spend money on Starbucks and weekend entertainment without seeing the ramifications it has on your budget…until next month when your credit card lender and antsy landlord start saying “show me the money!!”
So, how can we create more visibility to our daily cash flow to avoid stressful financial situations month in and month out?
I found that keeping a spreadsheet of my cash flow really helped me gain perspective on where everything was going and how much money I had available to spend every week. There are many
spreadsheets available online that you can download. However, you can also create your own and tailor it to your spending habits and lifestyle.
Below is a very simple example of a spreadsheet that I created to track my spending by month. The breakdown is as follows:
Fixed Assets: Consider this column to be the money that gets deposited into your checking account (i.e. available cash not incl. Savings) each month. This figure should equal your monthly paycheck after-taxes, 401k contributions, etc.
Fixed Debt: This column should include all of your fixed expenses each month (Rent, car payments, gym membership, etc.). If any of your regular expenses vary by-month, then do not include them in here…an example of this would be food or gas for your car.
Leftover Money by Month: Your Total Fixed Assets - Total Fixed Debt
Leftover Money by Week: Your Leftover Money by Month divided by 4 (assuming a 4-week month)
And tah-dah! You now know that you have roughly $250 (in this example) to spend each week on food, entertainment, etc. - while staying in the clear!
Helpful tip: You can also take it a step further by using the excel spreadsheet to tally up your weekly expenses. If you are someone that habitually uses credit cards, simply keep your receipts of your everyday transactions on-hand and then at the end of the week, tally them up in the spreadsheet to track your spending. This method will also help alleviate that shock factor of getting your credit card statement at the end of the month.
Now, this doesn’t mean to spend all of that available cash you have leftover each week. This method merely serves as a guide to help keep you out of the red! Just think, the more money you don’t spend now, the more you can spend later on that fancy trip you have been saving up for or on that xbox you have been dying to get your hands on…. or maybe even invest in an IRA and start having your money work for you!
Tagged as:
Budget,
how to save,
personal finance
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