Where Does My Money Go?
When people are encountering financial difficulties, often they do not know what steps to take to resolve them. Each month we will look at ways to help you improve your financial situation.
If money is short, the first step people often think of is to make a budget. This is not a bad idea, however, there is a step before making a budget that is key to its success. Normally what happens is someone sits down and makes a spending plan, but then the plan fails week after week. This cycle becomes increasingly frustrating and eventually people give up in despair.
So the question is, what is the missing step? Before any type of budget or spending plan can work, you have to know where you money is going. People often tell me they just keep track of it in their head. That method does not work because the small things tend to get overlooked (picking up milk or bread, coffee, etc).
There are many ways to track your expenses. The key is to find the best one for you. There are 5 main methods – the receipt method, the computer method, the notebook method , the envelope method and on-line options and apps. The common element in all of these systems is that you track EVER dollar you spend. The basics of the methods are: Receipt – keep ALL receipts Notebook – write down all items Computer –use debit for everything and track Envelope –allocate cash to individual envelopes.
On our website debtandcreditsolutions.ca (in the “Forms” section) I have provided a detailed explanation on methods of tracking expenses in the document named “Tracking Expenses” . Please feel free to call or email any questions you may have.
Next month we will review what you can with the information you have learned from tracking your expenses.