Where does my money go every month? Have you ever asked yourself that question? Or let’s frame it another way — do you have money left over at the end of the month, or do you have month left over at the end of the money?
All kidding aside, it’s critical that you set up a spending plan, and I don’t mean simply setting up a budget. Many folks craft a budget and place it in a kitchen drawer. Sadly, the budget never sees the light of day again. Even then, was the budget realistic? In many cases, it wasn’t.
So where do you start when the task seems so daunting?
For starters, turn to the Internet. There are many tools online that can assist. offers what it calls the Top 10 Best and Free online budgeting tools. You can’t beat “free,” and the simple tools provided might be just the road map you need to get a handle on your finances.
But before you hop online, let’s look at the mechanics of a spending plan and how you can make it work to your advantage.
First, you can create a simple spreadsheet on your PC or just grab a pen, paper and calculator. If you are single, find a quiet time and place. If you are married, it’s critical that your spouse is on board.
From top to bottom on the left side of your spreadsheet, number each line 1-31, which will represent each day of the month. From left to right at the top of your spreadsheet, label each column with your major- and not-so-major spending categories.
These might include rent/mortgage, auto payments, utilities, cable TV, wireless, insurance, clothing, groceries, child care, eating out, college savings, charitable giving and entertainment.
You should customize based on how you spend. For example, how much do your child’s activities run each month? A newborn’s diapers can add up quickly.
Let’s not forget seasonal categories. Do you golf or ski? If so, leave room for these outlays.
What about those little expenditures that don’t seem to matter? Do you stop every morning and grab a cup of coffee or run into a coffee shop during your afternoon break? If so, include coffee as one of your categories. You might be surprised at how much your daily cup of Joe costs each month.
Now it’s time for a little discipline. Every day — that’s right, every day — you must record each outlay under the appropriate category if you are to get a clearer picture of your cash outflows.
By the end of the month, you will have an answer to the question posed at the top.
Now is the time for reflection. Step back and begin creating goals. What are your priorities for you and your family? What are you dreams? How can you reach your goals given the restrictions on income?
Now that you know where your cash is going each month, you can create a plan to help you realize your financial goals.
Do you want to pay down your debt, or do you want to ramp up savings for college or retirement? What about a family vacation or the occasional weekend in the mountains? Have you ever considered an emergency fund that helps to cushion against unexpected items, including auto or home repairs?
Your spending plan should be a reflection of your priorities. But be careful. Don’t develop a spending plan that is so draconian that even Scrooge would throw in the towel after a few weeks. It must be realistic.
You’ll make mistakes — we all do — but you are more likely to adhere to a plan that is a reflection of your lifestyle and one that incorporates your goals and dreams.
