More often than not people don’t get ahead because of what they’re spending. Not what they’re making. We all know that in the back of our minds but how often do you really look at what you’re spending? Money is one of those taboo subjects and also one of those things that people are scared to face the reality of. The truth is, the sooner you face your finances, the sooner you’ll be on the path to financial freedom.
We know tracking finances can be a hard habit to get into but lucky for you this isn’t a challenge of looking at your finances every day. This challenge is to sit down and map out all of your income and spending ONCE. That’s it!
Ready?? Too bad, we’re going anyway.
Pick your favorite spreadsheet. (i.e. Excel, Google Sheets) and start putting in some numbers.
Start with income. If you’re a W2 employee this is a bit easier. If you’re in the freelance, 1099 world it can be a bit more difficult but look at the last six months to a year and get an average. We prefer to look at the year because work can be seasonal and you want realistic numbers.
Now for the expenses. Start with the hard consistent numbers first. Rent/mortgage, car payment, insurance, credit card bill, cable/netflix, utilities, taxes, cell phone, savings plan etc.
Now for the scary part……what else are you spending your money on?
Groceries, eating out, coffees, parking, gas, alcohol (I spent how much???)
Try and get a handful of broad categories and then find an average for misc.
You know the math now….income – expenses = ????
How’d you do? You killing it, got some extra or are you in the red?
There’s no judgement here. Knowing is the first step.
If you’re looking to really do some tracking there are some great tools available to help.
e3 Wealth – Financial Advisors