You have now been keeping track of your spending for about two to three weeks. This amount of information gives you a good basis to begin building on. Start by downloading our FREE Monthly Management Plan. Click here to download it as an Excel file or click here to download it as a Pdf file. There are two tabs as well as an instruction tab. We will only be looking at the Estimated Money Management Tab this week. Use the instructions tab to help you understand each listed category.
Using the tracking of your spending which you have been doing, begin working out an estimated amount of what you spend in each category. Certain items such as rent/mortgage, insurance, and debt payments are set for each month. Those are the easy ones to enter. Other items are variable such as electricity, heating whether gas, propane, or electric, as well as the more obvious ones such as food, gas, and eating out. Items which you get billed for each month are much easier to look back over the past few months to a year depending on how many records you have kept. Take the past six months or year if at all possible and average the amount. This will help average the difference between summer and winter spending (for example: heat is not used in the summer, but heavily used in the winter in the north). On the months that you spend less, you keep that money back for the months when you spend more. We will talk more about this concept week after next.
Once you have estimated to the best of your ability, each of the items, see if your plan is balanced. If it is not, begin looking at areas where you can cut back. Maybe instead of eating your lunch out each day at work, you can pack at least half the time. Do not cut out all the fun things in your life just to balance the budget because in a couple of months, you will rebel against the strictness of it and break the plan. Rather, cut back enough in multiple areas to help balance the budget. Next week, I will spend more time on how to balance the budget.