I hope you were able to accomplish the activity in our last post. If you are new here, you can click HERE to see the last post. Finding out where you are in the short-term isn't enough to manage your finances well in the long run, but it's a simple start for someone who has never sat down to think through where they are financially. Now that you know where your finances stand in the short-term, and unless it shows reason for concern (like maybe you are already overborrowing without even considering your daily expenses), we can now proceed with the other part of short-term financial planning: knowing your expenses.
Some articles you will read will tell you to use this tool or that tool, which can show you over time where you are and how you compare with other individuals. That's not really a bad thing, and if you think you can handle it by now, you can go HERE and check out some of the tools that you can use to record and analyze your expenses.
But even if you use those tools, one thing remains: you have to record your expenses. Here are some tips on how to keep it simple yet effective:
1. Use what you've got. I usually have my cellphone with me all day. And since it allows me to store memo notes, I set up a note each day and record my expenses there until such time I can transfer it to a more organized setup. For others, you may be more inclined to use a small notebook, or even record directly into your computer.
2. Details, details. These would include knowing where you spent the money, for what, what occasion, when you did it, etc. Most of the information might have no use for you now, but these type of data usually become meaningful when seen over time.
3. Summarize it, but keep it simple. I use a spreadsheet like Excel to organize the items I recorded in item 1. The thing about personal finance is that daily expenses are usually about just a few major items like food, transportation, recreations, etc. You may want to use subgroups which can help you in your analysis. But the main thing is not to overdo it. One tip to check if you are overdoing it: if a subgroup has only one or few items in it after several days, maybe it's not worth it to categorize it and analyze later as an item.
4. Don't judge your expenses. Well, not for now, not yet. Actually, you would have become more conscious of your spending by the simple exercise of recording it. You are probably spending more carefully even now. But thorough analysis may have to wait later.
When do you start? Well, today's as good as any. You may want to summarize later, when you have some data to work with already. The important thing is to develop the habit of recording, which takes time. It may take a month or so before it becomes second nature. And you will definitely have your lapses. The important thing is to start as soon as possible and keep on it.
Related Posts:
Have you made your New Year's Resolution yet?
Where is My Money - Part 1
Where is My Money - Part 3
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