Track Your Cash for Get Out of Debt Success
Angelique is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The first step to successful budget creation is tracking your spending. You can do it in a little notepad that you carry with you or via some sort of online system like Mint which is a free online tracker owned by Intuit (NASDAQ: INTU) or HelloWallet which is $8.95 a month or free through certain employers. But regardless of how, you need to figure out where your money is going – every cent. Some people successfully use a combination of both paper and online - paper for cash purchases and online for debit and credit transactions. Or, for tracking your finances on the go, check out these iPhone (NASDAQ: AAPL) apps.
Once you’ve tracked your spending for a couple of months, you’ll be able to hone your budget (yes, you should have one. If not, check out this article on creating one). If there are certain things that you can’t live without, like your morning lattes from Starbucks, make sure that they make it into the budget. As Jason Unger from automaticfinances.com says, “Remember, when you set up your budget, make sure every penny has a purpose.” Whether its mad money or emergency savings, every cent should be accounted for.
Your budget may also have to be revised from time to time. I found that I needed to revise mine after a few months of tracking my spending because it took that long to get a true grasp on what my spending was going to be over time. It may also need to be revised in situations like when gas prices take a hike or if your job suddenly has you traveling more than you used to or your kid decides that it’s time for a new sport. Hockey is expensive, Mom! Making revisions is recommended and necessary.
For a while now, I’ve kept my budget separated into a lot of different categories and since I used my debit card for almost all purchases, keeping track online was a snap. I had separate categories for groceries, gas, entertainment, pets, spa, etc. Recently, my income to expense ratio shifted a bit in a positive direction and I decided that I wanted to make even more of an effort to save money, so I put myself on a “cash diet” and now all of those separate categories get paid for with my weekly cash allotment and when it’s gone, it’s gone until the following Monday when I can make my next withdrawal. If you have a hard time managing your spending, this is a great way to limit yourself.
But, I still need to know what I’m spending my money on (see the need for budget revisions above), so I’ve started carrying a little notepad in my purse. And, if I absolutely have to buy something using a debit card, then that comes out of the following week’s cash allotment. For example, yesterday I spent $100 on a special light that will wake me up gradually in the morning like sunlight. Damned you, Amazon.com. So, next week I get to withdraw $100 less.
If I didn’t know how much I was spending to start with, I wouldn’t have known how much cash I could reasonably live on each week. It’s a little like losing weight, if you want to be successful, you need to track what you eat. In order to get out of debt, you have to track what you spend.
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