I think one of the best things you can do regardless of what kind of financial situation your in is to start tracking your expenses. This means recording every purchase you make from something as small as a cup of coffee you buy before work in the morning all the way up to your insurance premiums and mortgage payments. I think it’s also helpful to track all of the money that you earn.
The way I like to do this is by taking a legal pad and dividing it into columns. I assign each column a category. The categories you choose are up to you, my categories are gas, food, toiletries, phone, utilities, Insurance, rent, investments, miscellaneous, and money earned. Iv changed the names of the categories several times and will probably end up changing them again. The important thing is that every expense gets written down.
In the left margin of the sheet I write the date, then I write the amount of money I spent in the corresponding category. Often I will write a small note beside the dollar amount detailing what the money was spent on. For example, under the insurance category I may use a note to differentiate between renters insurance and car insurance. Most of my purchases end up going under the miscellaneous category. I always make sure to write a note beside items in this category because miscellaneous can contain anything from oil changes to haircuts. To see an example click here.
At the end of each month I like to make a separate sheet where I add everything up and I can find out exactly where my money went. I organize all the data into a table with the categories I listed above but also with more detailed sub categories. You can see an example of this here. In the example document all the amounts in the purple/blue color are the sub categories. They simply break down the main categories. To find the total amount spent for the month you would add the numbers in the Total Dollars column. When a category is underlined it means that it has sub categories under it. I find it helps to keep all of my receipts, that way I can see the exact details of what I spent. Recording my expenses in this way allows me to see where I need to cut back and lets me see if I’m spending too much in any area.
You don’t have to do things the same way I do, It’s all personal preference. The important thing is that you just get started and make sure EVERY dollar is recorded and accounted for. You might be suprised at how much money you actually spend on some things each month.
I think you will feel relieved when you start tracking your finances like this because it gives you peace of mind to know exactly where you spend your money. When that next bill comes you don’t have to worry about having enough money in your checking account because you’ll know how much you have spent and how much you have left.
I hope this was helpful to you and I hope you gain more confidence in your finances as a result of tracking your expenses. I would love to hear any questions or comments you have on this topic. Thanks for reading!