I got a letter from a young couple a while back and they were full of all sorts of questions, like:

“My wife and I both work full time and each get a paycheck every two weeks. We work darn hard for the money that we earn, but we honestly don’t know (or can’t figure out) where it all goes. Can you help us?”

Does this sound familiar?  All of us have struggled with managing the money that we do make at one time or another. Unfortunately, the answer to this problem is that dreaded ‘B’ word: Budget!
 
At the beginning of the New Year, it seems like a good time to begin to plan how to manage the money in those paychecks, for a month, or maybe even a whole year. Now how about that?
 
If you have unpaid bills piling up, creditors calling, credit cards that are close to ‘maxing out’, you do need to plug the leaks in your financial boat if the money doesn’t stretch to the end of the month – and a little beyond. And, the tools you will use in the beginning are fairly simple.
 
You need a small spiral notebook and something to write with for yourself and another for anyone else who have a paycheck and/or access to the money/bank account/credit cards, etc.

You and whoever else brings money into the house will use these tools to record every single penny you take in as income – or spend – for at least a month or more.  The longer you track your spending, the easier it is to figure out where all of the hidden leaks exist. It might be a royal pain in the keister, but it really does get easier as time goes on.
 
I learned this from a neighbor who has tracked his family spending for over 45 years. He just simply carries a little notebook and pen in his shirt pocket and records everything as the dollars leave his wallet.
 
So, at the start of each day, put the date at the top of the page. Be sure to start a new page every day; it will make things easier in the long run.

Then, make three column headings: Income IN, Income OUT, and Item (what you spend money on).

Examples would be:

Income IN: any money received, like your paycheck for 2 weeks, or perhaps the payback of a loan from a friend.

Income OUT: the amount of money spent at a given transacation.

Item: any time you spend money for any purpose, write it down, even if it’s a package of gum.  Don’t feel guilty about spending. The whole purpose of the exercise is to find exactly where and how you spend your money. (These will be your longest entries.)

Examples for Item and Income OUT might look like this:

Coffee for morning commute: $1.59
Gas for the car: $43.78 (you could also chart the number of gallons purchased and mileage if you want to be exact)
Lunch: $8.00
Haircut: $15.00

If you cash a check on Friday afternoon or take money from the ATM machine, and come Monday morning when the kids need lunch money and the wallet is empty, you will know exactly where, why and what the money was spent for. The bottle of soda you drank while waiting for daughter after basketball practice, the candy bar treat for each of the kids when you stopped for gas that evening, the pretty ‘to go’ cups of ice cream the kids spotted at the convenience store when you stopped in for gas on a Sunday afternoon drive – it all gets written down.

You will then know exactly where the money went during the week, and what for, simply because you kept track.

Knowledge is power; the power to help you and your family fine-tune the spending so you get maximum value from each dollar that you do send out of your pockets.

At the end of the month you will need to make a bigger chart in a larger notebook to add it all up, and to have a really big picture of where all the money goes.

Since every family has a different lifestyle due to the size of the family unit and income, each family has to make up their own chart accordingly.

All of the expenses like these go in the Income OUT column:

Rent/mortgage payment, utilities (heat, lights, phone, internet), food, (make a separate category for food eaten away from home), clothing, car expenses (fuel, batteries, oil, repairs, etc.)
Other expenses: School fees, cell phones for the kids, gym memberships, etc.

Remember, this process won’t work if you don’t do the work. And yes, it is a pain to start with, but it gets easier in time. Trust me!
 
As I am writing this column (mid-November), the news is full of yet more folks losing their jobs – jobs they have had for years – or having their hours cut to the bone due to the insurance the company is required to fund.

Many folks will soon be facing credit card bills from their Christmas spending (check that interest rate – talk about shock), plus the extra heating costs and other debts. Learning to live within, or beneath your ‘means’ (income) is the best long term insurance any family can have.

‘Til Next Time
–Paula