Part Two in Our series on Budgeting to Reflect Your Values
How much money did you have at the beginning of the month? How much will you have by the end of the month? Where did the money go? Did it go to places that reflect who you are and what you value? Are you not quite sure you want to find out?
I’m all about looking forward. If you ever talk with me, I hope you’ll notice I make a point not to focus on the past. We can start everything new for tomorrow and the great news is you’ve got the time to make serious and impactful changes. However, we need to know where our starting line is. We need to know what we’re working with, and the only way to do that is to peek into the sometimes scary dark corner that is our spending habits. We need to ask ourselves where our money is going.
We need to know how much we’re spending on:
Fixed and Necessary Expenses - Rent or mortgage payments, student loan payments, health insurance, car payments, other insurance, taxes, and all the other things you need that cost you about the same amount every month.
Unfixed and Necessary Expenses - Groceries, gas money, the things you need but that aren’t the same every month and for which people don’t usually mail you a bill.
Non-Necessary Expenses, aka Fun Money - Going out to eat, entertainment, subscription services, travel, trips to Target, clothing, and other things that are important but maybe aren’t totally necessary. This is not a bad category! The goal isn’t to take all the fun out of your life, but you must know what this number is, on average, per month. This is the category that is going to provide you with the opportunities to do some awesome stuff financially, and you know what? I’m willing to bet you’ll think it’s worth the tradeoff.
There’s an App for That
Okay, so you’re willing to take a look and find out where your money is going. You are not, however, ready to commit the next month of your life to saving receipts and itemizing them in your fancy new binder. I get it. Fortunately, there are apps for that.
There are plenty of apps that will link up to your bank and checking account and track your spending for you. I haven’t found any of them to be perfect, but they’re a good starting point to get a sense of where you are financially. They’ll help you get an idea of the starting line, and we will refine it over time. My personal favorite for this is mint.com because it will categorize for you and allow you to see where your money has gone over time. Simply looking at your bank and credit card statements should also be a good start to learning where your money goes.
The goal of this step is to be able to answer the following questions. I suggest you put them in a spreadsheet, which we will use later when we decide where we want your money to go. If you want the spreadsheet, shoot me an email, and I’ll be happy to send you the one I use personally and with my clients.
How much do I make a month?
How much do I spend in the following categories:
Student loan payment?
Other loan payments?
Credit card payment?
Going out to eat?
Other "fun money"?
The point is to know where our money is going. This doesn’t have to look like we want it to (yet). So be honest with yourself. We can’t change until we know. “How much do I make” should equal “How much do I spend.” Completing this step will allow us to get started on making a spending plan that reflects your values.