How many of you know at this very moment how much money you have in cash, checking, savings etc.? Not very many people could tell you where all their money is at this very moment. You should know these numbers. Every penny. At any given moment. Why? Because if you know where every penny is, you can put it to work. Instead of you working hard for your money, make your money work hard for you! I'll show you how I do it.
First I want to go back several years to see how I handled money when I was young and had no clue, so lets rewind to the year 2000. I was a freshman in High School and my first lesson in record-keeping came from filling out my record book for my Supervised Agricultural Experience in FFA (Future Farmers of America). I learned how to keep track of money spent on animal feed and vet bills and at the end, how much I sold my animals for at fair. Granted, this money during my freshman year wasn't actually mine for my steer and hogs and rabbits, it was my "parents" money. I logged every receipt though of everything used for those animals and I could see at the end what, if any, profit I made off my animals.
This was a good start for me in learning to keep track of all my expenses. It was also my first lesson in accounting.
That's where I want you to start. I want you to fire up your spreadsheet and put your headings in for date, description of transaction, debit (spent money), credit (deposited/earned money), and balance. Here's the difficult part of this, you need a separate sheet for each account you use money from; credit cards, checking, savings, cash and any other accounts. For descriptions, don't just type wal-mart because you're going to look at this later and think what the eff did I spend money on at wal-mart on this day. So write that it was something like wal-mart (clothes) in the description. It will help you to categorize what you spent your money on. If you pulled money out at the ATM, add it to your Cash ledger, if you spent money on your credit card, you need to set the formula to calculate the balance due with interest.
Keep track of where your money went for one month. The following month instead of seeing where your money went, I want you to tell your money where to go. All of it. I know you're thinking, "but I want to save my money, not live paycheck to paycheck". You will, because there is a method of budgeting that works really well! It's called the envelope system. Some may have heard of it. Some of you may have even purchased the full how-to book by Dave Ramsey. I went backwards and saw somewhere about an app called mvelopes. It also has a website https://www.mvelopes.com/ where you can create a free account (the app is free too) and it has all the education you'll need to successfully tell your money where to go. I was successfully using this system for a few months when I decided to purchase The Financial Peace Planner which I read in one night and it was the exact same stuff on the mvelopes website that I was able to read - for FREE! I sold the book back to thriftbooks.com.
People!!! I was able to successfully, and for the very first time in my life, pay what bills I had and I was able to save away 2 months worth of money for expenses in case anything bad happened and was working on a third months worth when I left the bank. A quick rundown of how this system works is this: 1.) You get paid 2.) you place what you've earned into "envelopes" with specific purposes for that money like a rent envelope, a grocery envelope, a savings envelope etc. 3.) you only spend what money is in that envelope on what it is specified for and you can't overspend because all you have in that envelope is $x.xx. For example, you have $200 in your grocery envelope and you go to check out and it comes to $202.98. You best be putting something back because all you have is $200! Its just good practice. There is room for shuffling, you can borrow from one envelope to put in another, or you can plan ahead and say you know your electric bill ranges between $55 and $75 a month throughout the year. Average that out and put that amount in the envelope every month and on the months you still have money left over in that envelope, it will come in handy for the months that the electric bill is higher. 4.) You tell ALL of your money where to go. So if you've divided out money into envelopes for all the bills, and you have some leftover, then put the rest in your $1000 emergency fund envelope or create an envelope for debt that you can start eliminating! I don't want you to be looking at your bank account and see that you have $30 and think that you can spend that on whatever because you have it. I want you to go to your app and see how much you have in your everyday spending envelope and don't go over budget. For me it was more important to save money for the "what-if" scenario than to pay down debt, so I started saving for my 3 months of expenses.
Stick to it. Put it in habitbull that you will reconcile your mvelopes account each night and that you will use the app any time you spend or earn money. You can thank me once you're debt free and sitting comfortably, right where you want to be! Have a great day everyone!
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