Follow the Money — Part I


I like to read mystery novels, usually involving “Who done it?” To solve that question, most of the time you need to follow the money.

The same can be said about your own personal spending plan. (Notice I didn’t use the “b” word — budget.) When I mention that word people’s eyes start to glaze over or I get the thousand-yard stare.

Bottom line — If you don’t have a spending plan, how will you follow your money? Or, to coin a phrase, if you don’t control your money, it’ll end up controlling you!

102915 SC Follow the Money - Part 1

How do you set up a spending plan?

Start with a blank sheet of paper. At the top, pencil in your take-home pay — the money that gets deposited into your account each month or every two weeks, as the case may be. Then make a list of your expenses.

What happens if I run out of money before I run out of expenses?

If that’s the case you have three choices:

  • Do nothing and continue doing what you’ve always done expecting different results (this is the definition of insanity)
  • Cut your expenses
  • Increase your income

Since you’re reading this it’s safe to assume you have chosen to dismiss the first option. Now we get down to the nitty-gritty. If you’re honest with yourself, and you really need to be here, trust me, you can find some things to cut. Also, consider a part-time job, just until you get some of those expenses you thought you could afford paid off.

Is that all there is to it?

Hardly. Take a good look at your spending habits. Keep a small notebook in your car and every time you stop at the convenience store, record what “stuff” you bought. I know one person who tried this and discovered she was spending about $35 per day on “stuff.”

OK, I wrote out a spending plan, so I’m done?

Unfortunately, no. It’s like anything else, it only works if you make it work. Your spending plan will change as your life changes. You won’t have the same income and expenses in your 20s as you will in your 40s. You’ll want to review your plan periodically; how often is up to you.

A spending plan is a GPS for your financial trip. You wouldn’t think about taking a road trip without a GPS, so don’t plan your life with a financial GPS.

– Mack Richie

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