Where Has All My Money Gone?

There's still a week left before you get paid again, and you're looking at the paltry balance in your checking account and scratching your head.  You wonder where all the money went.  Does this sound familiar?  If so, read on!

If you are wondering where your money went and how you will survive until the next pay check, it's time to get a better handle on budgeting.  The first step in budgeting is to account for exactly where your money is going. 

I use my Destinations Credit Union debit card for nearly every purchase I make (at least for now - unless Congress makes us pay more for the privilege), so it's relatively easy for me to see where the money goes.  If you use cash for your purchases, keep a notebook handy to jot them down or save your receipts and record them at the end of the day. 

Once you know who got your money, categorize your purchases for a month -- groceries, gas, food, bills, entertainment, etc.  You can do this on a simple spreadsheet or even with paper and pencil.  There are some good programs available on the internet to help you categorize more easily though.  If you use more than one financial institution, "account aggregation" programs also help you pull accounts from various institutions into one place so you can get a better handle on your overall finances.  My Credit Union offers "MoneyDesktop" from within our online banking platform.  Mint.com is another good resource (though they don't connect to all financial institutions, especially smaller community banks and credit unions).

After you have a month or two under your belt, take a good hard look at where the money is going.  Look for ways to cut your spending without it being too painful.  Are you spending nearly as much eating out as you do for groceries?  Maybe you could eat at home a little more often or pack your lunch every day.  Do you have a gourmet coffee habit?  Invest in a small gourmet coffee maker (at $4 or $5 a pop, you'll pay for that machine in no time).  Well, you get the idea....

In addition, look for ways to put a little bit aside each pay period.  Payroll deduction or an automatic transfer to a savings account is the easiest way to "pay yourself first."  Start small and increase the savings amount as you cut back on your spending.  Save any pay increases right off the bat - before you get used to the extra money.  If you get a bonus or some other unexpected windfall, save at least half of it.

The bottom line in any plan to achieve financial security is that you have to spend less than you earn.  Period.