One should always know what is coming in the door as well as what is going out. Single, married, divorced, or widowed – it doesn't matter. If you don't have control of your money, then your money has control of you. Take a look at these statements:
I do not want to be oblivious to where my money went or is going.
I want my money to work to help me accomplish my goals.
I want to understand my lifestyle choices and how I can be a better steward of my money.
If you agree with them, as I’m sure you do, then you should have a budget. In my experience working as a financial planner, most people cringe when I say the word ‘budget.’ So, I have found that I get a better response when I say ‘Monthly Spending Detail.’ I know that sounds a bit silly, but it works.
Tip #2 Create a Budget or Keep Track of Living Expenses
Creating a budget, or Monthly Spending Detail, provides a breakdown of where your dollars are going while also giving you a plan for the future. Although it can seem overwhelming, creating a Monthly Spending Detail creates a path towards understanding your expenses and a life with less stress. Creating a Monthly Spending Detail doesn’t have to be boring either. Picture it as art. What do you have to add, take away, or rearrange to paint the financial picture that you want for your life?
Building Your Budget
It's good to start monitoring your financial progress using a budgeting method. If you are not sure where to begin, then start by tracking your expenses for three to six months. Six months is ideal, but three is acceptable. I like to separate expenses into needs and wants. If you aren't sure which one an expense is, just ask yourself, ‘do I need this to live or is it something that I want?’ Include everything from house-related expenses to car payments, insurance premiums (home, auto, health, life, long term care, disability, etc.), groceries, entertainment, personal care, pet care, and vacations. Don't forget about camps for the kids (summer and sports), childcare costs, and private schooling. If you are anything like me, you will be amazed at how much you actually spend. Not paying attention to these expenses is why so many people go into debt and have a lot of credit card debt.
Using a budgeting method is also a great way to organize your finances. According to NerdWallet.com, one simple method is the 50/30/20 rule. This simple framework allows for 50% of your income for needs (groceries, utilities, housing, insurance, etc.), 30% of your income for wants (gifts, travel, entertainment), and 20% of your income to savings and debt repayment (emergency funds, retirement, college debt). Here is a link to their 50/30/20 budget calculator and more info about this budgeting method: Click here.
Creating a budget and tracking your living expenses may seem like a big task but hopefully this can be one of your first steps towards financial confidence. And of course, if you have any questions, concerns, or confusion, don’t be afraid to reach out to your financial planner…after all – that’s what they’re there for!
If you don't already have a financial planner, schedule a discovery meeting with Keli today!
Pursuing Your Best Self
This tip comes from my book, Unforeseen Exit: When You Find Yourself Facing Divorce & Suddenly Single, where I tell my story of navigating an unforeseen divorce. By openly telling my story, I want to provide guidance and support to women who have found themselves in similar circumstances, so they can pursue their best self personally and financially!
Want a free Monthly Spending Detail spreadsheet to better track your living expenses? Reach out and let us know!