Collect all of your paperwork – bank statements, investment information, mortgage paperwork, credit card statements, tax returns, etc., and set up a filing system to keep track of it all.
2. Lay it all out
There are lots of budgeting worksheets available online or from your financial institution. Go through your statements and determine what your monthly income is and where it’s all going. Divide your expenses into categories that make sense for you – groceries, loan payments, child care and so on. Fill in what you’ve spent in each category in the previous month.
3. Find the missing pennies
You’ll probably find there’s a difference between what you make and what you spend. If you don’t know where all of your money is going after step two, it’s time to find those missing pennies. For one month, write down every single penny you spend. Don’t change your habits, just keep track in a notebook or by always asking for a receipt and hang on to them. You’ll be amazed at how fast the lattes add up.
4. Start dreaming
The hard part is done, you’re organized and you know exactly how much you owe. You know how much you’re spending in what areas of your life, and may have ideas of where you need to cut back. Now it’s time to start dreaming. What are your financial goals? Do you want to pay off your credit cards? Take a dream vacation? Take a realistic look at your budget and see where you can cut expenses. It might be a 10% cut across the board, or less on groceries, whatever will work for you.
5. Stick to it
This is the hard part and where we all tend to fail. Make a monthly date with your money to see how you did and resolve to do better if need be. Keep your dreams top of mind by hanging up pictures of your vacation destination to remind you of the bigger picture and how you really want to spend your money.
If you need help, don’t be afraid to ask. The library and Internet are full of tips, advice and success stories to inspire you! You can always talk to your financial institution or a Libro Coach to help get you on track.