Where did your money go? Do you feel out of control? What direction are you headed in? What is the driving force in that direction? What is stopping you?
There are many excuses that get in the way of real and lasting change and we’ve been on a journey towards financial change in your life:
- Budgeting 101
- Baby Step One: $1,000 starter emergency fund in the bank
- Baby Step Two: Pay off all debts smallest to largest with the debt snowball
- Baby Step Three: Fully funded emergency fund of three to six months of expenses
- How To Mint
I’m not ready to go on to Baby Step Four yet because we are still striving away on Baby Step Three. Before all of these steps comes the budget. If you haven’t formed a budget for this month yet you are implementing the practice of insanity:
Insanity: doing the same thing over and over again and expecting different results.
It doesn’t take a nuclear theoretical physicist to understand that quote. Look at your life and finances without a budget and if you have a budget, you remember those days. They are filled with chaos, fear, dread and just utter worry. . .unless you happen to be independently wealthy. Even then, no budget = yes worry. If you don’t have a budget for this month, DROP EVERYTHING YOU ARE DOING RIGHT NOW AND BEGIN! Here’s a different approach from Budgeting 101:
- Open Mint. If you haven’t set up Mint to track your expenses, follow this guide: How To Mint
- Go to the Transactions tab.
- Look at every transaction in the list for last month (if it is near the end of the month, do this month) and give it a name. That means, place it in a category. Just click in the category column on a transaction then click the double arrow to the right. Each category has subcategories. You can add or edit the subcategories. If you just can’t remember something use “Uncategorized” for this month. Don’t make that a habit!
- Now that you have categorized every transaction, click the Trends tab to open that panel. At the top of the page use the filter to select the month you just categorized: This Month or Last Month:
- Below you will find a very revealing image of how you use money. If you hover over any section of the pie, it will show you how much you spent there and how many transactions. If you click on the “14 transactions” in this case, it will take you to a page to view all of those transactions. This is a great tool for reflecting on how you use money and you should use it frequently even after you’re using a budget. Remember, setting a budget is just another W.A.Y. S.M.A.R.T Goal and the first “A” is to assess and evaluate. Month to month you need to evaluate how your budget is working and where your money is going so you can steer more and more of it to where you want it to be. I want to leave a legacy for my children. Hopefully, your Uncategorized section is non-existent or at least very small. Whatever it’s size, Its OK. Just make it smaller each month.
- Below the pie diagram is the top items first draft of your budget for the current or next month. Click the Show more near the bottom to show the other categories of your spending. You can even export this list to a .CSV file to be viewed in Excel or a text editor:
- Take this list and analyze and evaluate it. Use it to set up your new budget.
If you’re human, you’re going to see something you don’t like in the pie chart or the list of Your Spending. Something just doesn’t line up with your why in life. Drill into the transactions in the section you don’t like. Are your Gifts & Donations too small? Your Auto & Transport, Food & Dining, or Uncategorized expenses too big? Time to blend our personal finance with our productivity. Take these problems in your budget, look at the transactions and make a small change for them and set your budget for next month. By looking at the transactions, set a W.A.Y. S.M.A.R.T Goal to support the budget goal. Just setting an item in the budget doesn’t, on its own, create the change. You need to modify your behavior, your habits. What habits let to the mis-aligned spending category? What habits need to be dropped or added to achieve the goal in that category.
This is the first round of a monthly cycle. Each month, continue to make small changes in the budget accompanied by related or “R” Relevant goals to support that change. Over time you will make your money work for you instead of working for your money.
For wisdom is protection just as money is protection, But the advantage of knowledge is that wisdom preserves the lives of its possessors.
Wisdom is more precious than money. By you’re wisdom you are here growing your wisdom. This wisdom will preserve your life and your money.