The first step in taking control of your finances is knowing your numbers.
Know Your Numbers
I know, I know. People tend to cringe when I say this, their eyes glaze over or they tune me out. I get it, there is nothing sexy about reviewing your bank/credit card statements.
The two most common reasons I hear for not wanting to track your spending are:
- It is tedious and time consuming
- The thought of finding out what I’ve actually been spending my money on is terrifying
So why is it important to know where your money has gone? I’m glad you asked!
Information is power. Knowing your real numbers will give you the clarity you need to create a spending plan that is realistic for your lifestyle. This will help you to stick to the plan. Once you know how much your life costs, you can take action.
Money Audit
- Gather 3 months of your bank and credit card statements
- Calculate how much money came in. I’m talking about ALL of the money that comes in. Salary from your 9-5, side hustle, alimony, child support, EVERY. SOURCE. OF. INCOME.
- Calculate how much money went out by category
This part may hurt a little. Some people call it their come to Jesus moment when they realize the amount of money they’ve been spending in certain areas. You may not even remember spending money on some of the things on your bank statement and may be tempted to turn into Shaggy.
Keep in mind that whatever your numbers are, they are not good or bad. They just are. This is your starting point to help you understand where you are right now to create a plan for where you want to go.
Let’s Dig Deeper
Now that you know where your money is going, ask yourself the following questions:
- How much does it cost to be you? Include all of the essentials (e.g., rent/mortgage, utilities, groceries, car payment, insurance, childcare, minimum debt payments).
- In which categories did you spend more than expected?
- How much money went towards your goals?
- How much money went to things you don’t care about?
- What expenses can you eliminate?
It’s Time To Create Your Plan
Download my Free Aligned Spending Plan and add the numbers you captured in your money audit to the income and expense categories. Don’t forget to allocate money toward your goals and the things that you love!
Take a look at your completed spending plan and consider the following:
- Are you spending more money than you make?
- Do you have an income issue or a spending issue?
- What are the numbers telling you?
If the money that comes in is less than the money that goes out, you need to make a change. Consider which expenses you can cut and most importantly, make a plan to increase your income.
On the flip side of that, if you make enough money to cover your essentials and still have money left over, determine how much money you will save and invest toward your goals and add it to the spending plan. Spend the rest guilt-free on things that bring you joy. In this scenario, you can still think about increasing your income and decreasing expenses to reach your goals faster.
This part may feel like you got a raise. Where did this extra money come from? It was in your bank account all along, the difference is that now you’re going to be intentional with your money, knowing exactly where it’s going and spending it on what’s important to you.
Bonus: The Money Date
Now that you have a plan, it’s time to maintain it. Regular check-ins with your spending plan are a great financial self-care habit. No two months are alike so personalize your spending plan each month.
Pick at least one day a month to reconcile your spending, pay bills and create your spending plan for the next month. This is your money date. This date can be with yourself or with your partner if you combine your finances.
I encourage you to have weekly or bi-weekly money dates until you know your numbers inside and out. I like Sundays for my money date. It’s a good reset day for me to close the previous week and plan for the upcoming week. My daughter has a new event going on at school every other week and weekly check-ins help me plan for those unexpected expenses.
Schedule your money date in your calendar and get started!
