A question I receive nearly every day goes something like this: I’m ready to take back control of my finances. But how do I get started? It’s like I’m stuck.

Don’t think you are alone if you find yourself wanting to do all the steps at once. But that could be a big mistake. If you were building a house, you wouldn’t try to pour the foundation, raise the walls and put on the roof all at the same time. It’s the same with building a plan to manage your money. You need to take things one step at a time …

 

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First, you need to lay the foundation. I call this initial step “tracking.” You cannot manage what you cannot measure. 

Tracking means knowing exactly where every penny goes. If you bring home $793.42 this week, next week you should be able to account for every single cent. Where did that money go?

I suggest that you track on a daily basis. The only way to do that is to write it down. Every morning start with a fresh sheet of paper or note on your smartphone. Somehow, come up with a method that works for you. Throughout the day write as you spend any amount of money, write it down. You need to record just two things: How much did you spend and what did you spend it on? How much, what for. Got it?

Do this for at least 30 days (longer may be necessary if you are really in a financial fog). One sheet of paper or note per day. Then just stash them away into a safe place and start fresh the next day. Ideally, both you and your spouse, partner or person with whom you share your finances should be tracking. 

At the end of a month pull out all of those daily records. Categorize your spending. You will begin to see patterns. Perhaps you spend $3.49 a day on lattes. Okay. That’s a choice you make. However, you might want to point out to yourself that if you keep this up for a year, you will shell out $1,273 on coffee drinks.

Apply this multiplication to all of your sending categories. Where are things really out of line? Can you see why you are spending more than you earn? How much of your spending was done with cash? Debit cards? Checkbook? Credit cards? What might you have done differently to come out with a more favorable end? 

It is not going to take the assessment of a professional financial planner to point out problems in your spending. You will see that instinctively. Putting things in black and white has a way of clearing away the fog.

You may find this to be the activity that keeps you going in the right direction month after month. Some of us find that we need to do this for the rest of our lives as a normal part of our personal finance management. It can’t hurt.

Cutting expenses in every way possible is the next logical step. The goal is to get your outgo to be less than your income by trimming expenses. The best way to do that is to trim a little bit in every area. Little things really add up when it comes to trimming just as they do when it comes to foolish and unaccounted spending. 

Just think: If you had your lattes just three days a week rather than seven, you would trim more than $700 from your annual spending. It takes time, but little by little you will be amazed how well you can do. 

Okay, there’s your jumpstart. I would love to know how this is working for you.

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