When you’ve reached the end of the month and all your bills are paid, do you often wonder where all your hard earned money went?
Improving your financial outlook can be as easy as uncovering your money drains to make your money work better for you.
The advantage of having additional funds for savings, repaying debts, or other important goals means that your money won’t seem to disappear into thin air.
A little detective work is all you need to figure out where the money is being spent. Once you’ve accounted for all your obligations, you’ll be better equipped to move forward toward your financial goals.
Use these suggestions to find your money drains and improve your financial picture with a budget that’s friendlier to you and your family:
1. List all your income sources
The first thing to do is list all the sources of income your household receives monthly. Knowing how much money is coming in is the first step to determining how much money is going out.
2. List all your expenses
Credit card and loan payments, gas, food, utilities, cable, internet, rent or house payments, car payments – be sure to list all of your regular monthly expenses. It’s best to list exact numbers or at least closely estimate a standard amount if those expenses vary month to month. Now you’ve got a good idea of what your basic expenses are.
3. Keep track of every penny
Spend one month tracking every cent you spend, no matter what it is. Put down your beginning balance and then list every dollar that goes in and out of your accounts. This is a necessary step in determining where you’re losing money, and where you can make adjustments for a better balance.
4. Now, review and interpret the results
Compare the money coming into how much you’re spending on bills and other expenses. Are you living beyond your means? Are you allocating any money for investments, savings, or retirement?
Determine what your money drains are. For example:
- Is the $4 you’re spending on an iced latte five days a week adding up fast?
- Are you dining out more than you should or at least more than you thought you were?
- Are you investing in convenience foods at restaurants and snack machines rather than bringing lunch from home?
It’s better to identify these money drains now and adjust your habits accordingly.
5. Use the information for improvement
Now that you have a written guide to income and expenses, you can control your finances better during the month. It’s right there in black and white, and you can refer to it later to fine-tune your finances until you’re saving more and spending less on money drains each month.
Identify ways to reduce individual money drains. For example:
- Maybe you can brew coffee at home rather than buy it on the run every week.
- Decide on specific days you can cook at home rather than be eating out.
Each of these steps may only save a few dollars every month, but they’ll add up quickly to pad your budget with additional savings you can use elsewhere.
Knowing how much money is coming in and going out is the first step to directing your finances toward what’s most important.
Control your spending and live within your means. Trim those expenses down to size or find ways to bring in more income so you’re not so strapped each month. Your financial future looks much brighter when you prepare for it this way!
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