*Tracking your expense is one of the most effective ways to make your budget work for you. If you don’t know how much your money is going to every month, it is a warning sign that you need to start paying attention.
*One small expense can blow your budget out of proportion. Many people afraid of budgeting because they believe they know how to handle their money.
*Most frequently, many who make decent salaries are often living from paycheck to paycheck.
There are many options to track your expenses. Sometimes being your own accountant is event more effective than the finance tracking software available out there. It is essential to understand what you are spending, where and why you are spending that money.
How to get started:
If you want to not live from paycheck to paycheck, here are a few tips to get started:
1) What is your goal?
Whether you want to buy a house, get a brand new car, save for your kids’ college fund, or get ready to retire,… having an idea of how to get there is important to success.
Not know why you are saving money will lead to less motivation to save.
Write out your goal and put it somewhere so you can see them.
2)Understand your budget:
a) What is coming in?
i. For most people, the only source of income is what you get from your company every 2 weeks.
ii. For example:
- If you get $2,000 every paycheck,
- That will be $52,000/year ($2,000 x 26 pays period),
- Which equals to $4,333 per month ($52,000/ 12 months)
b) What’s going out?
i. Figure out exactly how much money you are spending each month.
ii. For example:
- Mortgage: $1,300/ month
- Cell Phone: $100/month
- Car Payment: $300/ month
- Car insurance: $120/month
- Gym: $20/ month
- Home Association fee: $50/month
iii. The more details you put on this list, the better you will have an idea of how much money will be left to spend.
Related: TIPS TO PAY OFF CREDIT CARDS FAST.
3) Record your expenses throughout the day
Making a mental note of your spending is not an effective way no matter how good your memories are.
Record your expenses throughout the day. What I have done in the past was using the “Note” tab on my phone and wrote down every single transaction. With new technologies available, here are some of the tools I recommend using:
Both are very easy to use. The app will connect to all your banks account information . They both keep track of transaction you spend on your credit card. They also break down different categories for you as well such as foods, groceries, shopping, billing.
4) Pay off your credit card debt every 2 weeks
When you get your paycheck, the first thing you should do is to pay off your credit card debt.
Letting the debt built up will increase your interest, and you end up having to pay more than what you spend
5) Use cash instead of credit card
I can’t stress the importance of this method enough. Most people carry less than $10 in their wallet, and they prefer to use a credit card because they are convenient and lightweight.
Credit cards are deadly because of one reason and one reason only:
It makes you not think about how much money you have because all you do is to SWIPE the card. You will be surprised by how much you spend monthly by just a simple swipe.
I recommend withdrawing a certain amount of cash every two weeks. This method works well if you already understand what comes in and out of the bank account.
For example, what I am currently doing is allowing myself $500 every two weeks to spend. This money does not include bills or anything that I called “Dead Money”. I can adjust this amount to fit my budget and still living comfortably. If you can’t to understand more about “Dead Money,” I would recommend sign up and download my free bundle about investing.
Thanks for reading and hope you find this blog useful. Have a great day
