More than 40 percent of Americans check Facebook daily but only 2.2% check on their personal finances each day1. Of course, Facebook, Instagram and Twitter are far more fun than budgeting, but for a lifetime of financial well-being you need to develop a spending plan. Instead of wistfully looking at your friends’ travel photos, you can plan your own frivolity once you have a handle on where your money goes now and where it should go in the future.
Whether you’re in your first job or have been supporting yourself for years, one of the best steps you can take for your future success is to have a financial plan. Yet, only one third of Americans have one2. To get started, you need to track your expenses diligently for at least 30 days. The most important tool you need is psychological rather than technical: you need to commit yourself to tracking your spending at least as often as you check Twitter.
You’ll need a multi-pronged approach the first time you decide to keep tabs on your expenses.
- Get a notebook and pen — or a note-taking app on your smart phone — and write down every single dollar you spend in cash.
- Keep all of your receipts.
- Rack all your online transactions such as bill paying, especially if you have automatic payments, as well as online shopping.
- Keep track of any checks you write for your rent or other bills
- If you have money automatically transferred into a savings account, count that as part of your monthly expenses.
Once you are armed with 30 days of accurate records, you’re ready to calculate and categorize on a spreadsheet or a piece of paper. Be ready for some surprises: Looking at the money associated with an entire month of lattes and loan payments can be shocking. Some of the typical categories you can use are:
- Housing – your rent or mortgage payment
- Utilities – include your smart phone bill and Internet service here
- Food – both groceries and eating out
- Transportation – your car payment and gas or Uber rides or your subway and bus fees
- Student loans
- Credit card payments
- Medical bills
- Clothes
- Entertainment – this includes happy hour drinks, concert tickets and your streaming subscription for TV and movies
- Gifts
Don’t forget the most important category of all: savings. If you don’t have anything in that category now, your first priority after you review your spending should be to set up an automatic system to sweep at least a small amount of your cash into a savings account for emergencies.
So before you get ready to check your Facebook status for the 14th time today, retrain your brain to start monitoring spending. You may find your way to a tweet-worthy financial future.