In a world of endless financial information, how do we gain some knowledge that is useful in getting our money on track? I recommend tracking your spending as a first step.
It's hard to know where to begin in taking control of your money. There's a ton of financial information available – the stock ticker crawl along the bottom of the TV screen, endless internet articles, boring books with terms that put you to sleep as soon as you get into them. Where should you begin?
The first step is to gain some awareness as to where your money is going now. I like (and currently use) You Need a Budget, and I was a Quicken user for many years prior to switching to YNAB last year. But there's really no special program required. You should be able to log in to your bank and download past spending into a spreadsheet. You'll then want to sort those expenses into categories so you can get an idea of where your money goes today.
If you aren't a computer person, you can buy a notepad and write your spending down as you are out and about running errands or at home paying bills. The main idea is to get a handle on what you are spending so you can do some analysis as to whether or not that's really how you want to be spending.
Why is tracking where your money goes so important? If you don't pay attention, it can be easy for all your paycheck to flow through your fingers without doing anything toward building your wealth. Seeing what you've been spending on will help you understand where you can easily make changes.
You probably know what you spend on the big fixed expenses – your mortgage or rent, your car payment, and other similar items. But there are always variable bills, like that shocker of an August power bill that covers your air conditioning during the hottest month of the year. There are also non-monthly bills that can turn into nasty surprises if they sneak up on you. If you can look back over your past year's spending, you'll have a much better idea of what is coming your way this year.
So if you don't make any other moves this week, at least start out by tracking your spending and gaining an understanding of where your money has been going. That data will form the basis for your spending plan going forward, and will help you identify areas where you want to make changes.
They say knowledge is power, so get to know where your money has been going to gain more power over how your money is flowing out of your account. That's how you'll start to keep some of that money for your future self so it can build and grow over time.
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