by Stacy Francis, CFP®, CDFA
Spring is a time of renewal, which means there’s no better time than now to dust off your personal budget, dig the change out from under your sofa, and clean the cobwebs off your savings plan.
So how do you get started?
Begin by reviewing your income and expenses for the past several months. It is best if you use a software such as Mint.com. Mint pulls all your financial accounts into one place. You can set a budget and track your goals.
Make sure to review all cash, checks and credit card transactions. This will also help you identify a majority of your spending. Keep in mind that credit card expenditures do count. They are expenses that you will have to pay – ideally, in full, when the bill arrives.
The hardest part is tracking your cash outlays for your daily coffee and lunch at work. Mint.com will only show your ATM withdrawals. You will need to track how you spend that cash.
Once you have your income and expenses down, you’ll actually be able to see where you are spending your money. You may be surprised to find out you are spending more than you realized. Once your budget is in Mint.com, you can’t hide the fact that you spend $20 a week on Starbucks' coffees.
Armed with knowledge about what you’re spending your income on, you can begin to make lifestyle choices that help reduce your spending on a regular basis.
The difference between your income and your expenses (assuming the first number is bigger) should be looked at as your “opportunity money.” This money can be used for additional investments and savings and help speed your way down the path to financial prosperity.
Once you're done cleaning your financial closet, you may be ready for a spring makeover of your finances.