At the centre of the financial crisis there is one large pink elephant that does not get much attention: the fact that it wasn't only banks giving out loans to people who could not afford them, but people were lending money they could not afford to pay back. Personal finance is not a one way street, it is not a bank or credit card company's responsibility to make sure consumers make wise decisions. Unfortunately, too many lenders were all too happy to loan funds to those of us who should not have gotten that much credit.
The downside of not paying attention to your own finances, and leaving it in hands of your bank or credit card company to decide how much you can spend is a complete and total lack of control. You lose your grip of your own financial reality if a credit card company is all too happy to give you $6000 of credit, but you only earn $2000 a month. Having the $6000 to spend, without knowing exactly what you can afford, has been the downfall of many consumers. The first step to financial freedom is a simple, but often overlooked step: the personal budget.
How you keep track of your spending
The word budget can be so scary for some, that any motivation for financial control is thrown out the door. Usually, the ones most fearful of the word budget, are the ones who need one the most, and know it deep down inside.
Forget having a budget for now, because to make a budget, you need an overview of your income and your spending. That's where your budget spreadsheet comes in. There is also not time like right now to create a new financial spreadsheet, and ring in your future with a big step in the right financial direction.
Create a simple spreadsheet that you can keep on your computer desktop to track your income and spending. By the end of one month you'll have the answer to the recurring question of "Where is my money going?"
The main ingredients for a successful spending spreadsheet are a date column, one for income, one for amount spent, and a column to add notes on what the amount was spent on or where the income was coming from.
The key to success is consistency; update your spreadsheet every day you spend on something, and accurately keep track of your income. The easiest way to start off with a spreadsheet is to decide on a day to start your financial month. You could start it on the day you actually receive your main income, and then all expenses afterward until the next paycheck are deducted for that month. Choosing the date for your paycheck as the start of a financial cycle can make it easier to spot potential problems.
Financial health as a new year's resolution
As a new year's resolution, consider setting up a spreadsheet today. Even if you are in sound financial health, you might be surprised with where your money is actually going. You might even save some money in the end, and have a more financially stable, enjoyable, and healthy new year!
Christine Buske - Christine Buske is a Toronto based freelance writer. She has a degree in Biotechnology and Economics from the University of Toronto and is ...
