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So, Where Do You Start?

May 10, 2011

If you’ve been following this blog and are somewhat motivated to get your finances in order (or, just to get things in a little better shape), you may be wondering, “So what do I do right now…this week?” Here are some possibilities:

  1. Start tracking your spending/income. This is where it all starts, and this is THE KEY. So, at the very least, start writing down ever little penny you spend, and assign it to a category. Not only do you need to know how much you spend each month, but you need to know how much you’ve spent on housing, utilities, food, etc. Everything. And you need to keep track of this for at least three to six months, because each month will be a little different and you want an average. I’m sure that as you’re keeping track, you’ll start seeing places where you’ll want to cut spending. You probably already know what you spend on housing (since it is probably the same each month), so you’ll really be discovering what you spend, on average, on other monthly budget categories. Some people keep track in some kind of budget book, or on an Excel spreadsheet, or budget tracking software like Quicken, or online budget tracking websites like Mint. The key is to make it easy enough that you are sure to track everything over the course of many months. This may take recording your spending everyday! I bet this is where most people struggle the most…
  2. Create a budget using the last few months’ worth of spending data. Here is where you’ll need to make some decisions, and compare things to your income. If your income is $4000 a month, but you’ve tracked your spending at $4500 a month, then you need to decide whether your going to set your monthly budget at $4500 or at $4000. Some people think, “Well, we spend what we spend, so our budget is $4500 a month…” They may supplement their income by using their savings, or by increasing their income. Obviously, if you can increase your income, do it. Rather than dip into savings, the best choice is to find ways to cut spending. At this point, the hard choices are made. Are we cutting cable? Driving less? Eating out less? Changing the grocery list? Hopefully, you find that your spending comes to $3500 and your income comes to $4000. There are still choices to be made, but they are infinitely more enjoyable choices! What are you going to do with the $500 you save each month? Pad your emergency fund? Pay off a debt more quickly than planned? Save up for a purchase that is coming up (Christmas or a trip, etc.)?
  3. Now you’ll keep track of your spending in relation to your budget. You’ll want to watch your spending closely by checking every couple of days. Some budget categories will only change once. You make your house payment once a month (usually). But you spend money on food multiplet times a week. If you’re only 25% of the way through the month, but you’ve spent over half of the money in your grocery budget, you know to tighten up a bit. This is also a place where Mint or Excel or Quicken can be helpful. At the end of the month, you should be able to see every single transaction that has anything to do with food, or entertainment, or whatever. Once you see how much money you spent on shoes, it’ll be easier to find places to cut!
  4. Put as much on auto-pilot as possible. For me, this means making sure my bills are all being paid, in full, on the same day every month, straight out of my checking account or credit card. This is all automatically done online. I also have some of our monthly savings go straight into our savings account. Having as many bills being paid automatically saves me from having to “do the bills” during the month.
  5. Look for ways to save money each month, in little ways. You’ve already probably done this, but as your see your spending in relation to your income each month, you may notice little ways that you can cut money out of your budget and send it to savings. At this point, talk to other people. Ask other families how they use coupons. Ask someone about carpooling. Ask people where they are getting their insurance and what they pay (personal, I know). There are always ways to save money (or make money), and your neighbors are often the best sources of info. Ask!!!
  6. Look for ways to stay motivated to be frugal with your finances. If you are like me, you get all worked up about something you’re excited about, and you really stick to it for a month or two. But this budget needs to be something you use for the next 70 years or so. Think about running. People get motivated and do a bunch of running for a week. Then they get sick of it or bored or disinterested. Running for one week doesn’t do anyone much good. So some people start reading running magazines. They get running partners. They read running blogs or Twitter feeds. They study it. They borrow books on running. They try to get other people to run and teach them what they know. And they run for years without losing interest. So the same thing with finances. That’s why I subscribe to blogs on personal finance. That’s why I subscribe to Money Magazine. That’s why I write this blog. It helps keep me motivated. Also, success is motivating. Tracking your financial progress is motivating. So, do it!
Sorry this was so long…What have I missed?
One Comment leave one →
  1. Emily Shepherd permalink
    May 10, 2011 6:01 pm

    Sometimes, even when you’ve prepared yourself like crazy against losing motivation, you still manage to lose interest. I remember a lesson on marriage that we had somewhere from someone that addressed the issue of people who got married to quickly only to find out later that they couldn’t live with the person they married. It’s not just educating yourself on something, cultivating the talent, and sticking with it. You have to care about what you are doing and not do it just because you feel you have to. It’s easier to do things if you’re doing them for yourself or people you care about. Obsessions are nice (and pretty fun at times) but the real way that you figure out if you really care about doing something is to wait until the initial excitement is over.
    The two things I attribute the success in finishing my novel for NaNoWriMo are 1) that I worked to prepare for it, and 2) that it was something that I really wanted to do, and felt I was ready for. The combination of those two things were what carried me through the month, yet this April, when I made the goal of revising my novel for my Health class, I invariably failed. It wasn’t because I wasn’t prepared, it was because it was work. I couldn’t make myself do it because it was something that I had to do for my grade in Health.
    If you ever want to take on anything, your mentality has to be, not that it’s work that you have to do, but something good that you are choosing, and want to do.
    It’s hard to be a writer sometimes, because  Writer’s Block usually is just self-doubt. Your mind is telling you that the benefits of your writings aren’t worth the work and you cannot write because there is no motivation (Or the fear of failure. You don’t want to keep going because you are positive that you are going to hit a wall inevitably, and you’re never going to get around it and everyone always says that they would never do such a stupid thing as let the fear of failure stop them from doing something they want to, but it happens to be one of my biggest failings.) This is the point at which most people tell you to stick it out until the end because you’ll be glad that you did it, but if you’re doing something like maintaining a budget, and after several years of doing it (even after the initial excitement has gone away) you still find that you aren’t motivated to do it, or that you simply don’t care, then you either need to find a different way of doing it or you should stop doing it (maybe just stop doing it yourself. You could probably pay someone to do it for you). Using the running analogy, if you run for months and still find that you have a hard time staying motivated, maybe you should take a break from it for a while (until you get motivated again) or find something else to do.
    I realize that, with exercise, it’s something that people think you should make yourself do so that you can remain healthy (and the whole self-mastery thing), but I don’t think that it should be a huge deal and every day it occupies your thoughts a lot, because there are more important things you could be thinking about. I think that it should be something you enjoy, as well. I don’t think that you should have to do stuff (there are a lot of exceptions here) that you hate.
    So, I guess the whole point of this comment is that I think you should care first and foremost and then do your research and educate yourself. You should think about why your motivated to do it. So, you shouldn’t do it just because Brother Mickelson makes it look cool (or for some other weird reason). People are different.

    [Disclaimer: The reason that Emily finds it hard to believe that people like her writing is because sometimes it doesn‘t make sense. It‘s not that it‘s not well thought out, but it‘s that she thinks through her writing. So, at the beginning her opinion will seem fragmented and then it will almost make sense by the time you get to the end (with a lot of unneeded words in the middle). This is the way she writes, so it‘s not her fault if you got half-way through this comment and gave up. Also, apologies for how long it is. Emily isn‘t good at what people like to call the “short and to the point“ method. The remark “Geez, you don‘t need to write a novel!” is invalid, because sometimes, Emily needs to write a freaking novel. So, sorry.]

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