The second important aspect to money management this year will be understanding how you spend money. So many times we just “swipe the card” or “pay in cash” and are unaware of the amount of money we are actually losing out on. Having an idea of where exactly your money goes will help you to determine if the purchases are necessary or not, and also help you to save more money in the future.
Setting up a budget can be done in different ways. You can 1. Look at previous bank statements to determine where your money has gone, or you can 2. Look at a month ahead and determine where your money is going. For this newsletter, we’ll show you how to do option 2.
Step 1. Create a list of monthly expenditures. The most common are rent/housing, utilities, food, gas, and entertainment. Think of all the things you spend your money on a monthly basis and create a short list.
Step 2. As each day passes in the month, January for example, record every dollar that you spend in each of the categories on your list. Write down the date and the amount.
Step 3. At the end of the month, calculate the amount spent in each category
Now you’re halfway there! Now ask yourself these questions:
1. Where is the most of my money going?
2. Where is the least of my money going?
3. Should I be spending money more in one are and less in another?
4. If so, which areas need to be adjusted and how?
5. Am I overspending my income?
Finally, determine how much you “desire” to spend in each category for the next month (February). This is your budget!
Keep your budget visual somewhere nearby like on your refrigerator door. And be sure to return to it every day and with every purchase you make!