Fixing Your Money Problems

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RedLeafLoans.caThe Step-by-Step Guide to Fixing
Your Money Problems
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Are you finding it hard to manage your money?
Would you like to have more cash in your pocket
to buy groceries, pay bills, or for rent?  The
key to understanding your current financial
problem is to simplify it. Break it down and deal
with each problem individually rather than
chipping away at a mountain of debt.
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1. How does your financial picture look right
now? While it seems we are never content with
what we have, you must learn to track where your
hard- earned money is going.  Without
understanding how your paycheck is used youll
probably continue to blindly spend your money and
complain when you have none.
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The fix Look back 6 months and break down your
spending habits. Sounds boring? It is, but put
some hard work in and you will start to paint a
picture of your current spending habits. Classify
your purchases in to small categories. For
example, mortgage payments, bills (water,
electric, phone), and taxes are necessary and
will always be there. Lets call those Primary
expenses.   Then group together the reoccurring
purchases that can fluctuate monthly. For
example, grocery, gasoline, or lunch spend and
call those Secondary. Lastly, group together
the expenses that can be classified as Other
expenses. Examples include entertainment and
impulse purchases.  In other words, these are
unnecessary items. Now take all the items in
each category and add them together. You can now
place a dollar value on where your money is
going. Even better, divide each category with the
sum of all three categories. This gives you a
percentage.
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Example Below, you can see that 21 of your
income goes towards Other items.
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2. How can you improve your financial
picture? Now that you have an idea of how your
current financial picture looks like you can
begin improving it. Ask yourself, do I really
need to spend 2000 per month on Other category
items?
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You could go even further and create a new
category for money saved. Imagine the potential
savings from not buying lunch every day and
bringing a lunch from home. You could find
savings in every category but it starts by
knowing how your money is divided. It seems like
a relatively easy concept that many of us are
skipping out on. Perform this activity today to
gain better insight for tomorrow. This will help
create better spending habits and give you a
healthier financial future.
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Download the sample Excel spreadsheet
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Lets make this easier. Ill provide you with a
starting point. This excel sheet has each
category outlined along with a week-by-week
breakdown of all your income and money spent.
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Defining the tabs
Each of these tabs contains several expenses or
an income flow. Income is the money you receive
week after week from your job. Primary,
secondary, and other are expenses while savings
and main are the results of taking your income
and subtracting cost (Income Primary
Secondary Other Savings). The only tabs that
require data entry are Income, Primary,
Secondary, and Other.
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Inside the tabs, feel free to add more titles as
you see fit. Remember to make sure the Total
column is the sum of expenses for that week.
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Also, within each tab there is a summarization
chart. These help you visualize what is taking
the majority of your cost. For example, the
Primary might look like this
You can see that of the bills that are most
important, your mortgage payment is the majority
of the primary cost.
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In the savings tab you will see your account
balance. In this example the Week 1 and 2 spend
was higher than the earnings, so the account
balance was in the negative. However, as the
weeks continue, the account balance increases.
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This leaves us with the main page. You can see
that it is a summarization of the entire excel
workbook. It provides you with a breakdown of
your expenses and shows where your money is going.
This circle, as a whole, represents your entire
inflow of income and how it is divided. You will
notice that primary, secondary, and other expenses
account for roughly ¾ of your income. This
leaves 25 of your income in available cash. In
order for you to gain more cash in your pocket
you must reduce your expenses.
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Going through this simple exercise should give
you a better glimpse of your financial outlook. I
hope that you can use this as a starting point in
your journey to become financially responsible.
Good Luck! The Step-by-Step Guide to Fixing Your
Money Problems