Do You Know Where Your Money Goes?
Do you often wonder, where does all my money go? In the previous article, we discussed the simple math behind a common method for retiring early. In that article, we talked about needing to know what your current annual expenses are. Where is your money going every day, month, and year? Keep reading because I’ve provided you with a free excel sheet to help you figure out where your money goes!
Set Up Your Spreadsheet
If you have never tracked your expenses before, the first thing you will want to do is to create some sort of spreadsheet for this. In order to do this, you can create a simple excel spreadsheet or use my sample spreadsheet that I have provided below to get you started!
What are the basic payments (rent, mortgage, utilities, food, etc.)?
To start, you’ll want to get a good chunk of the easy information down. For example, I start with the things I know I pay on a reoccurring basis every month. For instance, this would be things like rent/mortgage, utilities (gas, electric, water), and internet. So, you’ll want to note down the amounts for each of these in your spreadsheet. Next, you can get a little more detailed if you know these numbers off the top of your head: TV subscriptions (Hulu, Netflix, Cable, etc.), magazine subscriptions, and groceries. If you don’t know the amounts for any of these, don’t worry, the next step will help you determine the amounts. Congratulations! You are well on your way to finding the answer to “Where does all my money go?”
Look Through Credit Card Statements
Once you have all those numbers, then I like to take a look at my credit card statements. If there were expenses you didn’t know the amounts for in the previous step, find them now (or wait until the next step). What was my average monthly credit card use over the last few months? Do this for every credit card you have. Did you spend $1500 last month on your credit card? Whatever you charged, now isn’t time for judgement. You are merely seeing what your starting point is.
While you are looking at your credit card statements, now is a great time to look through the detailed transaction list. Are you being charged for a monthly service you no longer use and forgot you were paying for? This is a great way to check to be sure you aren’t losing money to something you forgot about. This can be a big key to finding the answer to “where does my money go??”
Look Through Bank Statements
If your bank statements aren’t in the same place as your credit card, now is a good time to check your bank statements. Is all this money going to the right places? Are you paying what you thought for electricity and water?
Looking through all your credit cards and bank statements is very beneficial. You might realize you were spending way more money on eating out than you thought. Maybe your grocery bills are really high? However, right now we are merely working towards getting our annual expenses but through this searching, you might already find ways to cut and save money that doesn’t change your way of living at all right now.
Yearly Expenses
After finding all your monthly expenses, there are also things you pay on a yearly basis sometimes. For example, my list includes, car insurance, house insurance, yearly security/alarm system payments, car registrations, etc. Get all these numbers noted down in your excel document. To make it easier on you, I’ve created a simple excel file with some sample monthly and yearly expenses already entered which you can download for free here!
After getting the majority of your expenses noted, sum up all your totals. This will give you an estimate of your annual expenses! Great! You know where your money goes and are one step closer to taking charge of your finances. This is a really good accomplishment.
What is not providing value to your life?
Now. Your homework. Now that you’ve seen where all your money is going, start thinking about the things that might not be providing much value to your life. Are there things you could cut out of your expenses and you’d never miss them? You don’t have to do anything at all at this point. Just start giving it some thought. Ultimately, the goal is to spend less than money than you make.
Ready to start making some changes? Read this article on how you can save money on your fitness journey!
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