Keeping Track Of Your Cash

We get in trouble when we don't keep track of our spending. Does your money disappear as soon as you get it? Are your dollars spent before your get your paycheck?

If you answered yes...take a deep breath. You're not alone.



In Jean Chatzky's book The Difference her research tells us that 54% of Americans live paycheck to paycheck.

And 15% get further in debt each month.

It's time for you to get control of your spending. Here are three options to start:

1. Use a pen and paper (sounds simple, but it works)
2. Use an Excel spreadsheet
3. Use a money program such as Quicken or Microsoft Money

What To Do

Two quick notes: Save all receipts, and don't count ATM withdrawals as one expense. Cash from the ATM should be recorded separately depending on what items you spend it on.

For one month (to start) do the following:

Set up categories you spend your money on such as; rent/mortgage, electric bill, car payments, credit card 1, credit card 2, and so on...

Keep a piece of paper or pad with you during the day and keep track of every penny you spend.

At the end of the month, add up your expenses by category, and then total your spending for the month.

Subtract your expenses from your take-home pay(after taxes)

One of three things will happen:

• You will break even(not bad)
• You will have more income than expenses(very good)
• You will have more expenses than income(ooops)

A Closer Look At Your Expenses and Income

If you really want a clear picture of your financial situation before you subtract your expenses from you income please read the following:

You have expenses that come up throughout the year that you don't pay for every month. For example, Christmas or birthday gifts come around during the year. Think of any expenses you pay that aren't monthly and estimate the total amount you spend. Then divide that number by 12 months and you will have your estimated yearly expenses. Add that number to your monthly expense number you calculated earlier and that will give you a more accurate idea of where you stand with your outgoing cash.

For example...

Lets say you spend $4,000 the month you track your expenses, and you calculate your yearly costs are $3,000 dollars(divided by 12 months = $250 per month.) Your estimated monthly expenses would then be $4,250.

To get a better idea of your net yearly income, take your take home pay for one week and multiply it by 52 weeks. Then divide by 12 months. This will give you a more accurate monthly income amount because some months have 5 weeks and others have 4.

Conclusion

In one month you will have a clearer picture of where your money goes, and how much you take home. It may not be a pretty sight, but at least you will know where you stand. Read on for future posts to help you get on the right track.