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Step # 2: Where Your Money Goes Now

After a successful night of helping out a friend, I feel confident in sharing with you the second step in trying to get a firm grasp on your finances. Remember that step one [1] was getting all financially responsible (or irresponsible) parties together and promising to be honest about how things are.

The next step is to sit down and figure out where your money is going right now. You will need your bank statements for the last few months so that you don’t miss any expenses and your pay check stubs as well as any credit card statements that you have used to buy things on a regular basis.

One of my favorite bloggers [2] put a great excel spreadsheet on his web page to help us out. This sheet [3] is designed to take your income and compare it to your output. In addition it shows you what percentage of your income you are spending in each area.

This may help you identify some expenses you can eliminate immediately. For example, maybe you pay for unlimited netflix, but it takes you a month to watch the one DVD you get. So you switch to the plan that sends less DVDs and costs less money. Or maybe you get the newspaper every day of the week, but really only read it on Sundays (when there are comics). Maybe charges for bookstores are tying up most of your “fun money” and getting a free library card could provide you with the exact same books.

Keep an open mind and you will be amazed the changes you can make!