Ever wonder where all the money goes, live paycheck to paycheck or find yourself running low on cash? Here are some ideas for getting your finances where you want them.

Track Your Spending:

When I was growing up my dad used to ask: Where does all the money go?

To answer that question he started using an accounting program back in the late 80’s. It took diligent record keeping but after a couple months he discovered a big portion of his spending was going towards beer and cigars! He has since quit both habits (which is another story that involved rotating between chew, wine, vodka, and other substitutes before finally quitting cold turkey).

If you don’t track your spending, you have no idea where the money is going. The first step of getting on track financially is to get a handle on ALL spending. Looking at every purchase takes work, but the tools at Wealth Meta are here to help you with that. Often overspending comes from many “small” expenditures adding up to in a month (like a $5 coffee every day). Tracking your spending will show you how much you’re actually spending and give you a better idea of where to cut spending to better align it with your priorities.  

Establish a Budget:

A budget is a plan of how much to spend in each category every month (or year for some items). Spending is broken down into required items (rent, food, debt payments), and optional items (clothing, entertainment, etc). Budgets are, at their core, a plan for spending money in a way that reflects your financial goals. There are no judgements from Wealth Meta on how you want your budget to look. If you want to spend a lot on beer and cigars - good for you. If you want to save for a down payment on a home - good for you too. Many other websites will say you have to do X or Y with your budget or you are doing it wrong, but we don’t believe that.

We are really into budgets here at Wealth Meta, so much so that we created a app for budgeting. If you want to start low tech, try out our printable household monthly spending template.

Dealing with Overspending:

If you’re consistently spending more than you’ve budgeted, your spending is probably not in line with your priorities. Your budget is what you’d like to prioritize when you have a clear head. Your spending is what you actually prioritize in the heat of the moment. When considering a purchase, look at your budget first (which was setup by the calm collected version of you). If the purchase sends you over budget it would be best to reconsider. Good tactics for sticking to your budget are to hold off a day and price shop the item or plan to purchase the item next month. If you do end up going over in one category of your budget, you may still have wiggle room to reduce spending in another category so your overall budget stays on track.  

Automate Your Savings:

If you would like to save money but find yourself spending through your paycheck each month that leaves nothing for retirement or other goals. You can solve that problem by automating your savings. The idea is to set up multiple savings accounts at your bank and schedule automatic contributions after each paycheck. One savings account could be for vacations, another for a down payment on a house, and another for emergencies. With multiple savings accounts the money is mentally separated which is a powerful way to look at it since you’ve already allocated it to a given purpose.

Additional savings accounts are generally free to open at banks and credit unions and should have zero fees.

Another technique that has tax advantages is to automatically contribute to your retirement plan every paycheck.

When you auto contribute to your savings or retirement accounts you “pay yourself first”. Putting yourself first is a key to building wealth and being financially successful!

Revise Your Budget:

It is possible that your budget just wasn’t realistic. If you’ve tracked your expenses and don’t see a reasonable way to cut spending, you might need to adjust your budget accordingly, including by reducing your savings amounts. Budgets are living documents, and adjusting your budget doesn’t mean you’re a failure. In fact, it’s essential that your budget realistically represents your financial situation and your likely expenses in any month.

Account for All Expenses, Including Annual or One-Time Expenses:

Most people develop monthly budgets, but there are a lot of expenses that we incur only once per year, or that we have to pay just once. Some examples are:

• Vehicle title fees and maintenance
• Gifts for holidays / birthdays
• Vacations
• Property taxes and income taxes
• Some types of insurance
• Major home maintenance, like a new roof or sewer line
• Healthcare expenses

If you’ve developed a monthly budget that doesn’t take into account these annual or unpredictable expenses, you’ll likely find yourself overspending your budget regularly. It’s important to be thorough when developing your budget. If your health insurance has a $2,000 per-person deductible and you’ve budgeted $0 for healthcare expenses (because you’re young and healthy, of course), you could easily find yourself over budget due to healthcare costs. The same goes for major home maintenance or for failing to take into account taxes or other annual expenses.

Cut Your Spending:

If you’re consistently going over budget and your budget already takes into account all of your “required” expenses, the obvious solution is to cut your spending. Tracking your expenses should give you a good idea of where you could cut, and using our Income Spending Simulator should illustrate the importance of keeping to your savings goals.

Set Big Goals:

Working towards paying off debt, buying a new car, or saving for a luxurious vacation are admirable pursuits. Along the way it helps to think about those goals as motivators. If you don’t have goals it makes sense to some, even if you can only chip away little by little that is progress. Be ambitious since even if you fail you’ll still likely be a lot better off financially than if you never tried. We created a printable financial bucket list template to help you setup your big financial goals.

In Summary:

Understanding your spending is the first step to mastering your finances, and that means fully accounting for all of your expenses. Once you know where your money is going, you can either cut your spending to get back to the plan in your budget, or adjust your budget to better reflect your reality.  Automating your savings is an important step to mastering your finances so you "pay yourself first".  Finally to help steer yourself in the right direction set goals, some fun, some serious.