I took some time thinking about this one; if it’s the first step it must be important! I thought about tackling spiralling food costs, crazy car payments, and other straight forward expenses. But I realised we all have vastly different financial situations, and I wanted to start with some common ground. This is also honestly the best tip I have for getting debt free; it helped me pay off my credit card and overdraft debts 4 years ago.
The first thing you need to do is evaluate your spending. In the same way that writing down and tracking what you eat can help you to learn healthier eating habits, tracking your finances helps to see ways you can cut unnecessary spending. I have moderated my own spending tracking spreadsheet so that you guys can use it too: see link below for the super simple spreadsheet.
There are lots of finance tracking apps you can use, such as Mint, Acorn, Fudget (in the UK), but many of them charge money, and I find it easier to track my spending when I can see it all, and directly compare spending in each category, from month to month.
I have discovered so many useful things about my spending since I’ve been using this spreadsheet – the first that comes to mind was that sometimes I was spending more money on alcohol than I was on food! We usually do food shopping at Aldi, so our food costs are already very low – but we sometimes go for a walk after work and have a pint at one of our local pubs – but at ten pounds a round, it doesn’t take long for this hobby to overtake our food bills. Another thing that bugs me, that I’m still working on, is the “misc” category; it’s usually things like Amazon purchases, or bottled water, one off admin costs, and they can be very hard to keep track of.
Budgeting_tool_2017 < download the excel file.
All the formulas in the spreadsheet are set up – you just need to put in your info:
- The fields for each month run in columns, and there is a row for each type of income and expense.
- First put in your income – I gave two rows for this because you might have more than one income stream, but you can hide the extra row if you don’t use it.
- Next are fixed expenses, in light green – These are expenses that are likely to be exactly the same each month – you may be able to pre-populate this section for many months to come.
- The next four cells, in various colours, are things I have found it difficult to total over a month – Food, Entertainment, Alcohol, and Takeaways/Restaurants – so you enter the separate transactions over the month in the corresponding cells at the bottom of the sheet (they are colour coordinated).
- The next cells, in light yellow, are for variable but rarer expenses – but feel free to change these to suit you – you may not have a car, but perhaps a hobby that costs money, or you may have a subscription to add in – just change the titles to suit your life and your expenses.
- If you don’t have a credit card, just ignore the credit card fields, ditto for the loan fields – just leave them at zero and hide them if you wish.
- All figures should be entered as positive figures – you don’t need to put a minus (-) anywhere to indicate paying stuff off.
That’s all I can think of – but if you spot something that doesn’t make sense, please just hit me up in the comments below and I can provide more information.
And let me know – have you been surprised by how much you spent on something when you reviewed all your spending? Which things are easiest to save money on?
Debt free step 2 is available now.