This week I am going to cover one of the first steps that I took when I went about taking control of my finances and that is by starting a financial log, by tracking my expenses for a period of one week. Before I could play the super hero and save myself from financial rot, I needed to understand just how much money was coming in and going out of my pocket on daily/weekly/monthly basis. My thinking behind this was:
I cannot manage any project if I don’t know the scope of the project at hand
Spoken like a true engineer, right? But the concept is simple, you cannot get grips of your financial issues if you don’t understand the extent of the issue. This is where my best friend “Microsoft Excel” came in. I followed 5 simple steps for a period of 7 days:
Step 1: Open up Microsoft Excel
Step 2: Make some coffee (optional of course)
Step 3: Create/ your own version of Excel spreadsheet. Go wild! There are many fonts, colours, cell formats etc. that you can use to create that unique personal spreadsheet. (Yes you heard me right, creating an Excel spreadsheet CAN be fun)
Step 4: Populate the spreadsheet taking account of every penny coming in and going out on a “daily basis”.
Step 5: Analyse your log after a period of time (i.e. week, fortnight, month etc.) and try find flaws in your spending habits that you can work towards correcting the following week/fortnight/month etc.
You can create a simple spreadsheet as per the sample shown below:
Its that simple. As you can see you don’t need to have a Degree in Computer Programming to be able to create a simple log of your income and expenses. No excuses!
As you can see in the sample image above, I have headings such as “Date”, “Details”, “Amount” and “Category”. Lets quickly break them down:
Date: Self explanatory
Details: A small description of the item purchased
Amount: Amount spent – every single penny accounted for.
Category: I usually break down my expenses into 4-6 Categories and squeeze every purchase into those 4-6 Categories i.e. Food/Sport/Miscellaneous etc. This will makes things easier in the long run, trust me.
Above is just my idea of the headings, spreadsheet design etc. Everybody will have their own way of creating their spreadsheet in a way that suits them. That is 100% up to you. There is no right or wrong way of tracking your income & expenses. Just find a way that best suits you. It doesn’t have to be an Excel spreadsheet, it could be any number of ways i.e. notepad, word document, phone’s note application etc. Just try and find a way that is the most convenient for you. I found excel super beneficial, due to the fact that I can create different formulas, easily expand and create new sections, easy to update and overall very user friendly.
As well as keeping track of your expenses, you should also keep track of your income too. There are many form of income too i.e. money you find on the ground, wages, money your friend/sibling owes you from 6 months ago etc. Basically, you need to account for every penny that is coming in and out of your pocket. This is the best (and only) way you can start to get grips with your financial situation and start putting measures in place towards financial security. In addition, it will make you more aware of the money you are spending and will limit your spending considerably, trust me.
In addition to keeping a financial log, on a weekly basis I like to write a short paragraph to sum up my spending habits for the past 7 days. This is done so I can remember months down the line why my expenses were unusually high or unusually low for a particular period of time. This can also be done in excel by simply opening a text box and writing down something as per the sample below:
It can be as simple as that. Just write down quick bullet points any notes that will jog your memory in several weeks time. Nothing too specific. It sounds like a lot work, I know. It may just sound like a chore that really, you could do without. Right now, you probably want to stop reading this blog. You want a quick fix solution to your financial problems, so you can carry on doing whatever it is that you enjoy. STOP. News flash – There is NO easy way, quick fix solution to managing finances. It requires time, effort and some level of sacrifice. As the saying goes:
If it was easy, everybody would be doing it.
But hey, you are not alone. There is a reason why millions of people throughout the world suffer financially, from variety of internal and external factors. There are some aspects of our daily lives such as our finances that we can control and other factors we can’t. We just need to accept the factors that we can’t control and concentrate on factors that we can control. In reality keeping track of your expenses/income is not that hard. It takes 5-10min a day to quickly write down your expenses/income for the day and that’s it. After a short period of time it will become part of your routine. We all have time in this world to do anything we want to do, its just a matter of priority. If you honestly care about your financial future you will find the time to put measures in place to achieve it.
I would encourage all the readers to start their own log of expense/income in the coming week and analyse your weekly expenses at the end of the week. I promise you, it will shock you on the amount of money you spent on unnecessary things. Try it. Create a log today and before the next blog comes out, analyse your results and next Monday we will tackle another step to financial security. There is no excuses, if you can find 30min for Xbox time, TV time or YouTube time you WILL find 30min for your finances, if not, well I am sorry to tell you, but you are not serious enough about changing your habits if that’s the case. Come on! What are you waiting for? 🙂
If anybody wants to send me their cool/quirky (yet functional) spreadsheet design that they have created for me to have look just because you want to show it off or want my opinion on it, send me via email to firstname.lastname@example.org. I would be very excited to have a look through some of your funky designs. Remember, creating an excel spreadsheet doesn’t have to be boring.
If anybody has any questions, opinions or other ideas regarding this week’s blog or any topic as far as money management is concerned then please feel free to share your views in the comments sections below the blog or via email to me. There are no right or wrong answers or opinions. We are in this together to improve our financial status for the better.
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Thanks and chat to ye guys on the next one.