Before You Even Get Started: Tracking Expenses
Many a commenter has cracked wise about budgeting and personal finance education: “Don’t spend more than you earn,” they’ll say, “how hard can it be?”
Pretty hard, actually. Of course everyone knows the basic rule is to spend less than you earn.
A big problem for many consumers is that they don’t really know a) how much they earn, or b) how much they spend.
Personal finance education isn’t just about teaching people that simple rule, it includes figuring out the real numbers for one’s budget.
Income should be easy, but if you are not a salaried employee, your pay can fluctuate from one pay period to the next, depending if you worked a full 40 hours one week, or a little less that week, or had some overtime. To get a clear idea what your average true take-home pay is; double check your bank statements and pay stubs so you have a clear idea what is being deposited into your bank account on every payday. Based on your analysis you may find it best to assume each pay period you will work 38 hours a week versus overestimating that each pay period would be more.
As for expenses, that takes some work. We advise that people spend a full month tracking every dime they spend. Do this diligently every day and at the end of the month you will know what you’re spending currently, and you’ll have a much better idea where your “budget leaks” are and where to make changes in your new budget.
We urge you to take tracking seriously, and spend the time it takes to prepare yourself before constructing a new budget. Start by downloading our Power of Paycheck Planning seminar materials, available free of charge from our resources section on Credit.org, or view the online version of course right here in the FIT Academy.
I would encourage people to read this kind of articles it really has helped me a lot with my personal life. I have learned how to manage my money better and learned what the difference of needing and wanting is. This is one of the biggest problems that make people get in debt. And I can proudly say that due to articles like this have made me debt free.
Use Cash!!
Take out enough cash to last one week at a time. Make up your mind that the cash you have is all you get for discretionary expenses, or things that you could live without, each week. It's much easier to turn down a $60 pair of shoes when it will take the last of your week's cash than it is when you just have to swipe a credit card.