The single best thing I did to get a handle on my finances was to tear everything open and audit myself. I found out that, the way I was doing things, I was actually spending $200 a month more than I was making. Yep, I was in the hole $200 a month because I didn’t understand where all my money was going.
I promise this won’t really bust your head, but you will have to do just a little bit of geeky to get there.
Here’s what I did to fix it:
Use a spreadsheet program - I don’t care which (OpenOffice.org is free), but use a spreadsheet to handle the simple math. In the first column, write down ITEM for we’re talking about. In the second column, write down the ESTIMATED amount. In the third column, write down the ACTUAL amount (we’ll talk about that later). Title the fourth column, write the OVER/UNDER
Start by writing down your income - Is it monthly? Is it twice a month? Write down one line item for each check you receive in a month.
List your expenses - Start with the big ones like mortgage or rent. Then your car payment. Write down all of them. Get EVERYTHING in there. Here’s a quick list of what you’re likely to forget: dining out, gifts, entertainment (movies, etc), dues, fees, and recurring expenses, car maintenance (like oil changes and the like), magazine subscriptions, clothing budget, etc. (While we’re at it, the quick tip on this is: guesstimate how much some of these will cost over the year and divide it by 12. Then, just make THAT your monthly number).
Write a formula - At the bottom of column B, do a quick formula to sum up everything in the expenses column. (If you’re using Excel, it’ll look something like =SUM B4;B30). To the left of it in Column A, write down: Total Expenses. Now, do a formula BELOW that one that takes your total income and subtracts it from your total expenses. To the left of that, write something like “Actual Totals.”
One more formula - In Column D, do a formula that subtracts C from B (=SUM (B4-C4). This will show you the over/under on what you estimated versus what you actually spent.
Now, you have a self-constructed model to see how much you make, how much you spend, and where things aren’t necessarily lining up. From here, you can determine where you might want to trim, adjust, or otherwise make things line up. I used mine to build out a monthly budget, and also to determine some areas that weren’t making sense, expense-wise.
Feel free to email me for a pre-built spreadsheet that you can use to plug this stuff into.
Comments
Nice post. I do something similar, w/ Excel (yes, the eval empire)!