Your money or your life

I just read a great book entitled “Your Money or Your Life” by Joe Dominguez and Vicki Robin. It offers some practical solutions to money problems that arise from time to time.

I feel “captivated” by the purchases I’ve made over the past few years. Things I don’t need or want – just stuff that is stiffling my creativity. Here are a few tips either from the book or from Jeffrey Pritchard a financial planner in Beaumont, Texas, who writes the blog www.allfinancialmatters.com.

So, you need a budget

If you find yourself consistently short of money or you never seem to have enough funds for a vacation, a budget can help. A budget is simply a plan for how to spend your money. It doesn’t have to be fancy. In fact, the key to sticking to one is to make sure it’s both realistic and simple.

Joe and Vicki suggest that you grab a blank notebook. Write down everything you spent money on today, from the utility bill you paid by check to the cash you spent on a latte from Starbuck’s. Do the same thing tomorrow, and so on, for a full month. That’s the only way you’ll know where your money is going. Pritchard.

Take stock.

At the end of the month, create basic categories – like food, clothing, shelter, and savings – then allocate your expenses accordingly. (If you’re computer-savvy, putting them into a simple Excel spreadsheet can make the math easy.) If you know you have certain areas of weakness, like eating out, break those out in more detail (restaurant meals, breakfast at a coffee shop, coffee from the corner grocery.)

Now that you know how much money you spend each month, you can divide it in ways that are more satisfying. For example, if you want to have more to spend on cultural events (like plays and concerts), maybe you are willing to forgo hair coloring at the salon. (Or if you’re like me you want to reverse those expenditures.) You should end up with a list of all your expenses and how much you would like to spend on them each month. Use this as a guideline for future spending.

I keep up with my own household budget with a Quicken program which is easy for me. I have some 30 different accounts from personal care (Hair salon) to mad money (it’s there just to blow) so I won’t lose my mind being a good girl all the time.

You can also sign up for an online money-tracking program like www.wesabe.com or www.mint.com. If you do your banking online, you simply link one of the programs to your bank and credit-card accounts and the program automatically grabs your spending activity from those sources and categorizes it for you. For example, if you put $125 worth of groceries from Whole Foods on a credit card, www.mint.com or www.wesabe.com records that in the food category. Then you can check your actual spending against your budgeted spending whenever you want, without having to save scraps of paper and enter the information by hand. However, you do have to remember to enter cash transactions. These programs can see that you made an ATM withdrawal, but not what you spent the money on, making them best for people who use debit or credit cards more frequently than cash.

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