In part one of this series, we talked about the importance of goal setting when it comes to financial fitness and we decided that a nice trip to Paris in May 2019 was just the thing. The next step is to break the goal into meaningful pieces. And to do that we need to understand at our monthly expenses. That is the focus of today's installment.
This is probably the step most frequently missed in becoming financially fit. Why? It just isn't fun and can be downright depressing. Unfortunately, you won't be going to Paris unless you dig into the details so let's get started.
The first thing you need to do is look at your pay stub and see how much cash you actually bring home each check. It always surprises me how many of us don't actually know their true take home pay. If you are fortunate enough to have a salaried position, your take home pay won't change from week to week unless you make more than $128,400 a year. If you get paid hourly, this can be a harder exercise but it still can be done. Look at your last three or four checks and take the average amount. Then determine how much money you make in a four week period and assume that to be your monthly pay. (Yes, that isn't quite precise but it will help in your plan to save money!)
After you have what we will call your top line, know we have to determine your monthly bills. The best way to do this is to find your bank statement and see exactly where your hard earned money goes.
Sorry girls, in order to get a hold of your finances you need to do become intimate with your bank statement. The reason is that most of us have no idea where our money goes from month to month and without that knowledge it is impossible to figure out where to find savings. Many of you will find that while you can identify many of the larger expenses items on your bank statement, like rent and cable, there are also a lot of cash withdrawals from our trips to buy groceries or just from the nearby ATM. We will circle back to this problem in our next installment but it goes without saying that you need to know where every dollar goes to truly get financially fit.
Okay, for most of us the largest monthly expenditure is our monthly rent. Sadly, most of us can't save money there. Next, most of us have a cell phone payment to make along with cable and maybe a Netflix or Hulu payment to make each month. Some of us are responsible for a utility payment as well. At any rate, these should be easy to identify on our bank statement.
One large expenditure that sometime escapes these kinds of exercises is food. Do you really know how much you are spending a month on food? I can guarantee you that it is more than you think.
Start by trying to determine how much you paid for groceries and other household items over the last month. If you have used a debit or credit card when shopping for groceries, this is easy. Then think about all of the other food items that you buy on a regular basis. Do you go to Starbucks every morning before work? Eat at the company cafeteria with co-workers most days? Happy hour with the girls every Thursday? If you use your credit card for these items you will easily be able to identify them but a lot of us like to use cash for these purposes, because it makes us feel like we are being responsible. At any rate, using cash makes it harder to track but it can be done.
After these expenses, many of us also end up spending money in a variety of ways. Some of these expenditures happen less than monthly but it is still important to understand what they are so that they don't cause your financial fitness plan to go sideways. These include car related expenses, like oil changes and insurance, clothing (gotta stay stylish!), and perhaps getting your hair styled every few months.
At this point, you understand how much money you bring in over the course of a month and you also understand how much money you spend in a month. In the next installment, we will talk about how to start making changes in your financial habits.
Want the chance to win an Echo Dot? Use the link to go to the home page and sign up for our Weekly Newsletter! Be first to know about our sales and get special discounts simply for signing up!
You know you want Alexa in your apartment!