Where did my money go?
Remember, there are two sides to our simple mantra that is crucial for achieving financial independence (which we’ll define later!): your earnings and your spending.
Since it’s rather difficult to control the earnings portion in a time like this (though we’ll certainly be keeping our fingers crossed for this to pass the House), what we can do is control our spending. And like I’ve mentioned before, if we don’t know how we’re spending our money, there’s no way to control it!
So, what’s the problem?
In this economy, one of the easiest things we can do is control the spending side of the earn/spend equation. But we have to first understand where our money goes. How can we track this?
Two Solutions, and One Challenge:
We’ll explore a simple spreadsheet, the software Mint, and then go to our first challenge.
A Spreadsheet:
The beauty of this is that it can be as simple or as complicated as you like. The rule for this is simple: in this spreadsheet, keep track of every bill you have, every payment you make, all cash you spend. The downside is obvious - it requires a lot of work to consistently update it. J.D has an excellent list of templates to get you started.
Mint:
Understanding the primary drawback to using a spreadsheet (it requires us to manually update it), the most advanced and useful online software I’ve come across for tracking expenses is Mint, one of the most impressive startups to come out of a conference called TechCrunch50.
I’ll save the details for a fuller review on Mint, but for now, understand its key functionality: it links to your bank accounts, credit cards, and investments to automatically update your spending. You only have to do a little tweaking to categorize and enter any cash expenses. Incredibly easy, and, in the world of personal finance, this type of knowledge is truly powerful.
The Challenge:
For the next week, track ALL of your spending. From the morning coffees at the local coffee shop (of which I’m quite guilty) to the utility bills. The important thing is that you are completely honest with yourself and dedicate a little effort to find where your money is going. Trust me, this will be incredibly valuable down the road.
