Thursday, January 20, 2011

Gaining Control - What Do You Really Know About Your Own Spending?

You may or may not think you should be on a budget, but truly, we all should. Whether we just make ends meet with a minimum wage job or make over a six-figure income, we should all be in charge of where our money is going.

Here is a little exercise I want to challenge you with. Both you and your spouse do this. You can consult on what the topics are, but each of you should estimate this on your own to compare later.
  1. Just off the top of your head--Write down your household income sources and expected income from these. This should be the easiest step for most of us. But some of us live on a fluctuating income that is based on a privately owned business or on a sales commission. Do your best based on your history and a realistic expectation of the market you are working in.
  2. Again off the top of your head--Write down your monthly bills. Not just the big ones. All of the ones you can think of. Cell phone, insurance, childcare, the works.
  3. Last one off the top of your head--Write down your monthly miscellaneous expenses. Not bills per se, but things you do each month. Groceries, manicures, gasoline, coffee shops, etc.
Now, sit down, WITH YOUR SPOUSE, and go through the checkbook (or the online banking site) and see what the real story is.
  1. Write down your household income sources and what can realistically be expected income from these. Look at the banking info. Write this next to your estimate.
  2. Write down your ACTUAL monthly bills. No guessing. No rounding. Look at what the bills really are costing you and write down each next to your estimate.
  3. Write down your monthly miscellaneous ACTUAL spending. This is probably the one that will shock you most. Whether it is how much you actually eat out or how many times you actually stopped at a convenience store for a soda. Maybe you didn't realize how much gasoline your car actually burned.
How did you do? Did you or your spouse come closer?

Taking a look at your actual spending as opposed to what you perceive you are spending is a huge part of cleaning up your financial life. Next we will take a look at how to control your money without being controlling.

Let me know how you did!

Photo credit: jeinny

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