(Best of Celebrating Your Journey – April 2008)
To all my readers: With 2019, the 14th year of my Celebrating Your Journey blog articles, “From the Heart” byline, I will be offering the “Best of the Best” articles you found helpful through the years. Many thanks to everyone who have given input and followed along w/ each month’s lifeskill—Relationships/Core Values, Time Mgt, Career/Money Mgt, Recordkeeping, Possessions, Housekeeping, Wellness, Meals, Childcare, Recreation/ Entertainment, Reflection, and Celebration. For my new readers, may these lifeskill articles offer you encouragement, insight, and commitment to seek, reach, and achieve your life dreams and goals in synergy.
(April 2008) This month, Recordkeeping, will be the focus in helping you find and plug those spending leaks you have discovered in your budget. Let’s then continue playing monetary detective for a moment and track down some more hidden curves in your currency trail.
Leaks in your budget mean you are spending money without knowing where it is going. This can be serious and threaten your financial security. Budgets leak for many reasons.
Learning to recognize some of the reasons may help you plug the leaks.
First, do you plan how you spend your money?
If not, this is where you start. Planning can be simple and make your dollars buy exactly what you need and want. Planning will help you spend your money wisely rather than magically disappearing. Design a family spending plan that will provide for current spending, savings, and short- and long-term goals. Utilize a financial management software program. Create your budget within the linked feature. Denote what your income sources are and your expenditures each month, for one year. Designate those expenses that are mandatory/fixed, and those that are discretionary. Within your discretionary expenses, you will then start to see where the leaks are first.
Are you dining out too much?
Are you buying clothes you really don’t need? Look at each category and give some time to being honest with yourself and your family. Then commit to reducing that discretionary spending by an amount you definitely know you and your family can commit to. Make sure all amount are SMART—specific, measurable, attainable, realistic, and time-phased. After you go through the discretionary expenses, review each mandatory one to see if there is any way you can reduce that expense. One example is refinancing your car loan to a lower rate. The same goes for your house. Do you think you can do without an extra car that sits in your driveway? With a little creative thinking, you just may come up with some possible ideas.
Next, do you keep meaningful ongoing records of where your money goes?
Records show where and how your money is being used. If you don’t save receipts, you probably don’t know where at least half your money goes—I almost guarantee it! There are two steps to start your money management commitments after you have created your first budget:
Start saving ALL your receipts in a dedicated file box or file cabinet with category labels/tabs. Mark your receipts accordingly. Make sure the whole family does this if you are all living on the same budget.
Start using money management software (i.e. Quicken) to do automatic transaction downloads. You will then very easily be able to reconcile each month, matching your bank statement balances. And if you have any investment account, you can include them in the software program, keeping track of your dividends, interests, and growth of assets.
All spending transactions will also be categorized so you can see how they match your budget at any time. You will then see where you are overspending and become aware of your poor buying habits. Recordkeeping and budgets also help you decide if you should keep using your present spending plan or make changes. You may want to not buy one item and use the money for something your family has wanted a long time. But make sure you include those goals and wish lists in your budget.
You will need both hard receipts and software reports to match against to insure you are accurate with your spending categories and any tax credits you may be able to take advantage of.
Remember, when you are surprised by how fast the money goes, you have any number of leaks. Unfortunately, after discovering the leaks, we often regret the purchase and feel it wasn’t worth the money. In the next issue, we will begin to understand how family characteristics, personalities, and attitudes affect spending.