Finance Roll

I read several blogs on finance and budgeting, and the one thing they all say is that you must track what your money is doing. I have been doing this for quite some time, and I have developed a pretty good spreadsheet that has evolved over the years. I am planning on fixing it up and giving it away to everyone that signs up for my newsletter, so make sure you stop over at the box to the right and leave your name and email so you get it as soon as it is ready!

As a lead in to the release of my spreadsheet, I thought I would give you five ways you can work on getting your financials in shape for the new year.

Track Your Income and Expenses

Surprise! I bet you didn't see that coming. Seriously though, you can't hit a target you can't see. By keeping a spreadsheet (or money management program like Quicken) with all of your up to date finances in it, you can stop areas such as overspending before they get out of hand. This can also be a great motivator when you see those debt balances start dropping! Once you get a look at my spreadsheet you will notice that it tracks a lot of things such as your current ratio, income, expenses, taxes, debt, debt ratio, net worth, etc. Taking the time to update these numbers each payday really makes a difference.

Review Your Spending Habits

This is a bit of a tedious exercise, but a very useful one. For one month, write down everything you spend money on and I mean everything. If you buy a coke from the machine write it down. One of the ways I have found that is easiest to do this is to save every receipt and drop them into a box at the end of the day (if you don't get a receipt write it on a small piece of paper). At the end of the week, assign each receipt to a major category. The first month you should not vary your spending at all, just capture everything. At the end of the month, take some time and review what you spent your money on, and look for areas that might be out of control. Everyone has them, it might be the amount of money spent on eating out, or clothes, or just entertainment. After you have found your hot button, the next month whenever you are about to purchase in that category ask yourself if you really want what you are about to buy. You will find at the end of that month you will have probably reduced spending in that area. The next month, make a game out of it. See how much you can cut your spending, and at the end of the month take what you saved and actually save it. If you can continue tracking what you spend like this, you will drastically change your habits. Unfortunately most people drop this pretty quickly (me included).

Start Saving

I know everyone out there knows they should be doing this, but for some reason not many people act on it. I think the problem is that most people do not think they have any money left. So start off small. Find a place where each night you empty out your pockets or purse of all the change you collected during the day and keep it in a jar. Make that jar off limits, after all, how much money could be in there anyway? Once the jar is full, take it to the bank and put it into an account. Notice I didn't say count it, NEVER count it. The reason is that in reality there is much more in there than you think, and if you count it you will spend it. Just take the jar to the bank and tell them you want to deposit it, the worst that will happen is they will want you to roll it which you can do at the bank. Once you have done this for a couple months, then along with the change, start putting the dollar bills in there as well.

Stop Charging

Once again, this is some pretty common sense stuff that most people have problems with. If you do the math, your credit cards are sucking more out of your budget than you think. If you are only paying the minimum payment on a credit card, it will take you more than 10 years to pay off the balance if you pay on time. Don't even think about being late! The best way to do this is to get rid of them, cut them up, shred them, burn them, just get rid of them. If you want to keep one in case of emergencies (I don't really advocate this unless it is a charge card such as American Express that has to be paid off in full each month) then put a freeze on that one card, literally. Freeze it in a block of ice in your freezer and thaw only in case of emergency!

Set Financial Goals

Finally, set some goals in the financial area of your life. This isn't all about saving, find some ways to make extra money. There are plenty of ways out there where you can make a little extra money. One that I have come across that sounds good is West at Home. I have not tried this, but essentially you work as a call center agent from home when you want to work. If anyone has tried this or does on account of this post, let me know about your experience. Saving and cutting costs isn't near as fun as making more money, so go figure out how! As always write down your goals and make sure they are measurable.

So there you go, that should get you started in the right direction for the New Year. If you have some other tips on how people can make and save more money this year, please share them below!