The FIRST step for successfully manage personal finances is keeping track of your money.
It seems simple, but it is SO important and overlooked by so many people. According to a report by the CFP board, 59% of Americans aren’t tracking their spending, and 40% have never created a written budget.
My husband and I sadly fell into both of those categories. We weren’t tracking our spending or creating a budget. We always had a good amount of money to save every month, but that isn’t because we were wisely managing our money. It was because our debt-to-income ratio is incredibly low.
One of the reasons it is so low is because I purchased our house when I was single and making less money. Fast forward to after we got married, and we had both of our salaries, plus mine had increased several times.
- 1 As we got closer to my due date, that is when we really started taking a harder look at our finances.
- 2 When we actually examined each purchase, we were amazed at how much a $5 purchase here and a $10 purchase there can really add up over a month and especially a year.
- 3 This tells me that a lot of Americans likely think they are doing okay, and don’t realize that their financial health is not as good as they might think.
As we got closer to my due date, that is when we really started taking a harder look at our finances.
Where was all of our money really going? What were we spending it on? How much of it were we spending?
The answer to those questions for us was SHOCKING. You may think you have an idea of where your money is going, but unless you are really tracking it, you will probably be very unpleasantly surprised at how out of control it might be.
We didn’t make a lot of big purchases, so we always assumed that we were doing alright. When we first sat down and examined an entire month of spending, we couldn’t believe how high the number was. It was about $1000 ABOVE what I thought it would be.
When we actually examined each purchase, we were amazed at how much a $5 purchase here and a $10 purchase there can really add up over a month and especially a year.
It’s crazy because we truly believed we had been wise with our money. We thought we were doing okay.
This is not unlike other Americans. According to a report by the Federal Reserve, 75% of Americans say they are doing okay or living comfortably. But according the the same report, 39% of Americans say that if they were faced with an unexpected expense of $400, they would not be able to cover it.
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This tells me that a lot of Americans likely think they are doing okay, and don’t realize that their financial health is not as good as they might think.
The reason that keeping track of your money is the first step to successfully manage personal finances is because if you don’t know where your money is going, then how can you manage it? If this is something that you aren’t doing, you need to start today!
This is why we started buckling down and keeping track of EVERY PENNY we were spending. I created a simple monthly spending tracker because digital doesn’t always work for me. I get a different kind of satisfaction from writing it down. If you would like a free copy of my monthly spending tracker, please subscribe to my newsletter below!
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