If you’re like many folks, each New Year brings new resolutions for really getting on top of their finances that year. You know, best intentions for increasing savings, to save for the kids’ college education, to save up for a down payment for a new house or vehicle, to save for vacation – in advance – and the like.
Folks sometimes get discouraged before they even get started. All they see are numbers and anticipated bills floating around in their mind. And lacking some written expense accounting or budget, it’s difficult to identify potential areas of opportunity for squeezing in another expense.
Yet every resolution requires a starting point. A specific action. That first step toward success.
It’s time for ‘The Challenge’. Your Personal Challenge tasks you with tracking all of your spending for 30 days. Every expense, no matter how large or small. Every expense, whether incurred weekly, monthly, quarterly, semi-annually or annually. Yes, every dime.
The end result of taking ‘The Challenge’ is that you will gain very informative and useful information. You will have a factual basis for beginning to make informed decisions about your spending. You will have specific, accurate data for reviewing your actual spending compared with your financial priorities. And then you can adjust your spending accordingly, as needed, to position your spending in sync with pursuing your financial priorities.
Don’t fret – this expense tracking may be easier than you think. Several great tools are available to ease the pain of the tracking, such as the You Need A Budget (YNAB) and Good Budget apps. These apps are flexible and can easily be used for entering expenses ‘on the fly’ or receive downloaded information from your bank or credit card accounts.
You could also download all transactions from your bank and credit card accounts directly into software or a spreadsheet, then categorize and sort the data further. Don’t forget to add in additional expenses, such as those from your pay check deductions or, as examples, those which you pay annually. Or you could resort to using the old-fashioned pencil and paper method. Write down all of your expenses, categorize them and tally by expense category.
Regardless of which method you choose, you’ll gain very valuable information and be able to assess areas where you may overspend, potential areas where you may scale back or areas that are potential candidates for reassigned priorities.
How the numbers stack up will be enlightening. The numbers will provide you with the means for making informed decisions. And they should provide a boost toward putting a plan into action toward achieving those new resolutions.
So take The Challenge! What are you waiting for?
Have questions about where to start or how to interpret your data? Give us a call. We’re always here to help.
Image credit: 401(k) 2012