3 Simple Steps to Money Management

You must think I spend all week looking at my budget sheets, organizing my receipts, and planning our expenses or managing investments. How do I get anything else done when I spend so much time looking at and running the numbers?

I do run a personal finance blog after all, right?



It may seem overwhelming to take control of your finances. Should you pay off debt? Should you invest money? What should your goals be? That all comes after you put together the pieces of your money management puzzle and define your values and priorities.

In reality, I spend about 5-10 minutes managing our finances weekly.

Here are 3 simple steps to get started managing your money:

Budgeting

I’ve put a system in place with a budget we analyze 1-2 times per year around the start of our fiscal year: the school year from September to August. We budget using a simple spreadsheet in Google Sheets (sample spreadsheet), but there are templates available through a quick Google search, or software programs you can use to create your budget.

Our budget focuses on a 10-month salary with summer savings built in, but you can adjust the numbers to fit a 12-month salary, bi-weekly pay, etc. from my sample.

In the end, you want something that shows your income, your expenses, and what your savings goals are. This will give you a full picture of where you stand financially. Are you bringing in far more than you spend or are you teetering on the edge of living above your means?

Tracking

Next, you need to know if you’re actually following your budget. You need some way to track what is coming in and going out or being transferred between accounts. I use Money Dance for Mac which I purchased back in 2011. It takes some time to setup, but once everything is setup it does what I need it to do. Previously, on PC I used Microsoft Money which appears to be now obsolete.

Then I set up our recurring income, expenses, and savings transfers in a money management software on my desktop. Once tsetup, I track our spending and see how it lines up to our budget items each month. This takes about 5-10 minutes per week if we’ve been out to the store and inputting the receipts. If we need to shift things, I do so.

Forecasting

Since I’ve setup the recurring check register items in the software above, I am able to forecast what the future weeks or months may bring. This is important especially with unplanned expenses and where that money might come from.

I usually forecast out the next few weeks on a regular basis (software automatically does this for me through transaction reminders set to publish 15-20 days in advance). During the summer, I forecast the entire summer until our next planned income so I can make sure we don’t go over our budget for what we saved for those months.

Through forecasting the future, I can adjust our plans if we find a gift needs to be given for a wedding that was not budgeted for, or if we have extra income and where that should go.

As of today, I can tell Chris how much we’ll have left as extra in the coming month. He likes to know if he has wiggle room for projects, and I like to know if we will have a bit left over to invest. I’m the saver, he’s the spender (if you couldn’t tell).

We operate on a zero-based budget, which means essentially all of our money is spoken for. When we get paid, there isn’t much thought into what happens to that income. It shows up, it is moved about to savings, or slated for an upcoming bill. The goal is to reach zero (or close to it) in our account every time so we aren’t tempted to spend any extra money we should be saving to reach our goals.

If you’d like to listen to more about our finances, I co-hosted the House of #EdTech with Chris a few months ago and explained it all in detail in an episode titled “No Cash Left Behind”.

Once you put a system in place to budget, track, and forecast your spending you’re pretty much on the path to reach your goals. Now, it’s time to decide what those goals may be when you see what you have left to work with.



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