We’ve all faced some challenging financial times in the last several months. Many of us have suffered losses that were painful and long-lasting. Now we’re faced with the difficult task of having to climb out of a monetary hole we never thought we’d be in. The prospects are daunting.
To make that climb, we need to get control of our spending first and foremost – and that means breaking old habits and using new tools. For instance, we have to slow down or stop our misuse of credit cards and find a more beneficial alternative like reloadable debit cards. We have to think before we buy to make sure we get real value back from our purchases. We then need to take this rescued money and plow it into a real savings plan. But before any of this is possible, we first have to organize.
We need to keep track of our monthly income and expenses in order to control them. That means some kind of written record. Someone comfortable with a computer can use a simple spreadsheet or a financial program like Microsoft Money to track everything. There are even some new online budget services that help track anyone’s personal finances for free. But in any case, paper or electronic, it all starts with the record-keeping.
All bank statements, utility bills, credit card bills, etc. have to be collected and organized. A simple file box with a sleeve for each bill category will work just fine. The sneaky bills have to be organized too. Those are the one-timers or the bills that hit twice a year or so. Everything goes into the box so you know where everything is.
Then, plotting out what was spent in each category is next. Going back a couple months will work but going back to the first of the year will end up giving a clearer picture of where the money goes. It’s busy work for sure but necessary.
The busiest of all is marking down the daily cash purchases we all make. This seems like over-kill but it’s not. That’s because these are the “Phantom” purchases that can really drain our budget. Most of us have no real idea what we spend our cash on until we do this little exercise for a couple of months. It’s really eye-opening.
Once an organized system is in place it’s surprising how our spending decisions change. We find ourselves doing things like packing a lunch to work instead of eating out every day. We stop buying little things with our credit cards and switch to prepaid debit cards instead. We actually start up and stick with a savings plan because for the first time we can see the money grow. When our finances are organized, we can’t help but weigh our choices more intelligently and the more intelligent our choices are today, the better off financially we’ll be tomorrow.
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