First of all, Happy Valentine’s Day. Hope you have taken time to let someone you care about know it today. It usually doesn’t always have to be a big ordeal. Just a quick phone call or letter can make a big difference in some one else’s life.
Setting Up A Personal Budget
Last time we were discussing what’s the best way to save for retirement. Part of that training showed you the power of automatic withdrawals to savings. This week, the topic will build on the other. To be able to save for retirement in the first place, you got to know where you money is going. Just as you would in a business, you have to keep track of what comes in and where it goes out. Unfortunately, you can’t run your finances like the Federal Government and just spend your way out of your problems. (Note: This never has worked and to think it will ignores all principles of finance. Kind of like saying if I step off of a taller building, I won’t fall to the ground this time.)
Developing Your Balance Sheet
Ready to develop the You, Inc. balance sheet? Here goes. Start with all you income streams. For most of us, this is very simple. You have one, maybe two, depending on how many jobs you are working or if your spouse is working. This goes on the income side of the balance sheet.
Next comes the expenses. These are the tough ones, because if you haven’t done one before it might seem a little overwhelming. Actually it is quite simple. Here’s what you do. Carry a piece of paper with you through out the week and write down every thing you spend money on including the use of your credit cards. Do this consistently for 4 weeks or for the whole month depending on whether you are paid every two weeks or once/twice a month.
Expenses Can Be Shocking
Once you complete you tracking process, list everything out and set up various categories which make sense to you. Remember, this is your money and your own You, Inc. Typical categories might be food, utilities, gasoline, clothing, car payments, house payments or rent, credit card payments, credit card purchases, amount put in savings, etc.
Totaling Your Balance Sheet
List Income first and below that list the various categories of expenses second. The subtract all of your expenses from your income and see if you have a positive or negative number. If it is positive, you can at least say you are already headed in the right direction. However, if this number is negative, you may have some challenges ahead and some immediate action is required.
Correcting A Negative Balance Sheet
How can you right the ship and get your balance sheet showing positive? The answer is easy but not always simple. The answer is to cut your expenses. Review what you are spending your money on and look for the easy things first. The easy things are things like how often are you eating out instead of taking your lunch to work. Could you take your own coffee from home and not spend it on a high priced cup at a local coffee shop? Instead of buying soft drinks from the vending machine, maybe you could buy a 2 liter off brand for half the price of a smaller vended one? One of the easiest yet hardest ones would be to leave your credit cards at home in a safe place and not carry it with you. That way it will require you to have to make an extra trip before making a purchase giving you time to think about your purchase to see if it is something you really need or just want out of convenience.
Taking swift action in many of these areas could save you any where from $5 to $10 a day. That totals to $150 to $300 a month. This is newly found money not to run out and buy more stuff, but to help you work with making your balance sheet even more positive. Remember that the more positive your balance sheet is, the better your retirement can be if you follow the simple approaches to creating an automated saving system.
Hope this issue of Retirement Cures has helped. To learn even more details on this whole process, you can get the free retirement savings plan from our main web page.
Until Next Time….