If you are anything like I was, you find yourself wondering where all your hard-earned money went at the end of each month. There seemed to be a money pit in my bank account that kept sucking my cash into the abyss. It literally disappeared month after month. Darn, that Loc Ness monster! I needed to take action and tame the beast! The beast happened to be me!
Discovering your financial drains will enable your money to work for you, funding savings, debt repayment, or other important things instead of just disappearing into nothingness. If you don’t have a plan for your money, your money will have a plan for you.
Get ready to play Sherlock Holmes! It may be necessary to do some detective work to determine where your money is going. If you don’t know where it goes, who else will? The best way to get a handle on your finances is to get everything accounted for and then move forward toward your financial goals from there.
Try these tips for finding your money pits and improving your financial outlook with a family-friendly budget:
1. Calculate all income. The first thing to do is calculate all household income sources. Include every penny that comes into your household, and I mean every penny. Put together a chart listing income sources and amounts for the past 30 days. This will give you an idea of how much money is coming into the household, which is the first step to determining how much money is going out.
2. List your expenses. List your regular monthly expenses, such as rent or house payments, car payments, credit card and loan payments, gas, food, utilities, cable, internet, streaming services, etc. Everything you spend money on should be included on this list; leave nothing out. Try to list exact numbers or estimate if your expenses vary. This will give you a good idea of what your basic expenses are and what money pits exist in your budget.
3. Track every penny. Spend an entire month tracking every cent that you spend. Write down your beginning balance and then every dollar in and every dollar out. This is the key to determining where you’re losing money. Try the zero-based budget approach f
4. Interpret the results. Compare how much money you bring in to how much you spend monthly on bills and other expenses. Are you spending beyond your means? What are you spending your money on? Are you allocating money for savings, investments, and retirement?
- If you have money drains, determine what they are. Are you spending $4.00 on an iced latte Monday through Friday? Are your dining-out expenses much higher than you expected? Are you eating from vending machines or expensive fast-food joints at lunch rather than brown-bagging?
5. Put this information to good use. You can control your finances more effectively with your written guide of income and expenses. Once you have this information in front of you, it will allow you to fine-tune your finances gradually until you’re putting more money into savings and less into “money drains” from month to month.
Determine ways to reduce these money drains.
Can you brew coffee at home to save money every week? Can you cook at home to save money on eating out? A few dollars saved monthly in different budget areas can add up to your benefit.
Once you know how much money you have coming in and going out, you can start directing your money toward what’s important to you. Trim down your expenses or find ways to increase your income so you’re spending within your means. Your financial future will shine much brighter when you enable yourself to prepare for the future you desire.