This first step to getting your financial act together is getting organized. To me, this means organizing a few key things:
- A monthly budget where you write down your income and all (and I mean ALL) your expenses.
- A savings plan so you make sure you are adequately saving money for your emergency fund, a value fund (to save money for something you value like a big vacation), car expenses, and medical expenses.
- Your debt payoff worksheet where you will list all your credit card debt (or loan debt if you are tackling that) and an annual plan to paying it off.
- Finally, a worksheet where you can list all of your online accounts and passwords. This is optional. It is a useful tool for me because I lose track of this. And, after all, this file is password protected so it is safe to list this information.
So, how are you going to organize all this? Yesterday I mentioned Mint.com. You can also use a software program like Microsoft Money. For me it works to have an excel file where I develop and keep my plan and use software programs to keep track of my plan, analyze my trends and take advantage of potential savings. So, lucky you. I prepared an excel file with all of these worksheets and a sample budget so you can see how it all works (link below). Before you download the file, I should tell you that the file is password protected. This is important. Always protect your financial information – so be sure you change the password after you fill it out with your information. Currently the password is: money. To change the password, under FILE click SAVE AS and OPTIONS.
Here is the link to download your money management excel file (password: money).
I’ll go over the worksheets separately. Today is budget worksheet day!
Budget worksheet: This is set up to build a monthly budget for you. Start with your gross income at the top and then fill out your payroll taxes below. This has formulas throughout, so you’ll see that your net income be calculated after you fill in your gross and payroll taxes. Then start filling out your fixed expenses. Be honest here. If you need to estimate, round up not down. After this, fill out your flexible expenses. A couple of notes on this:
- Fun money: think of this as adult allowance or fritter money. I take out $200 cash and put it in an envelope and use it when I want to buy a shirt, or lip gloss, a movie or drinks out with my buddies. This is my way to allow my inner consumer fritter – but control it.
- Credit card debt: if you have it, make this as high as possible – but not so high that you are completely depriving yourself. If you completely deprive yourself, you won’t stick to the budget.
- Groceries: yes this includes ALL food and drink (coffee, lunches out etc.) unless you take it out of your fun money.
- Medical: this is an average of your monthly expenses on medicine and doctor appointments, just to make sure you always have cash around for that.
- Emergency savings: you should focus on getting and keeping $1,000 minimum in this. This is for emergencies like if your car breaks down or your dog eats a bag of chocolate (hello vet!) or your hot water heater breaks. So much can happen. This way those little hiccups won’t snowball into something worse that involves interest.
- Value fund: This fund is to make sure that you saving for something that you highly value and want to do. Think life experience. Who are you minus your work and errands? What skills and interests do you want to develop? At the dinner table, what stories do you want to be telling? My value fund is a travel fund, that way I have $3,000 a year to go on a few trips and tell stories about wild animals chasing me and climbing volcanoes.
So, after you make sure your expenses aren’t more than your income, just plug in when you are going to pay each expense (on the 1st of the month or 15th). Most folks get paid twice a month, so I did it this way. You can set it up differently according to how you are paid. Just make sure you do it. Then implement it. We’ll get to budget tracking later on. The first step is a solid and realistic plan.
