Counting Your Dollars

A smart way to consolidate your finances and get an overview of your money situation is to monitor your spending. It can be sobering, even shocking, when you actually write down—to the exact dollar—what you spend money on every day. Yet, financial planning is very common. In fact, most families claim to partake in some form of financial planning. The amount of of debt in this country speaks to a different reality though.

Most people, contrary to their claims, simply do not keep track of the dollars they spend. They gripe and moan about a $100 utility bill, and then will gladly drop twenties on various items throughout the day. What's to blame here is not ignorance, but rather a culture of debt. Our society, especially here in America, has come to view the global treasury has the best prepaid debit card. We can go as far into debt as we want, because we'll pay it off later. But later you—we—will have just as many debts and financial obligations as we do now, if not more. The best way to handle your financial situation is to keep track of your dollars now, on a day to day basis.

There are an abundance of web applications that will organize your finances for you, but you might be better off doing it yourself with nothing more than a piece of paper and a pen. Make a little spreadsheet for yourself, outlining each day of the week. Don't use Excel. Do it by hand (I'll explain why in a minute).

Calculate how much money you make in an average day. At the top of each of the blank days in your spreadsheet write this number. At the end of the day on Monday, write down how much money you spent underneath how much you made. Don't fudge the numbers. Add up every dollar you spent: breakfast, lunch, and dinner; prorated portions of your monthly bills, including credit card payments, car insurance, utilities, etc.; the amount of the gasoline you expended getting to work; your morning cup of coffee, your afternoon cup of coffee; your Happy Hour beer. All of it. Don't leave out anything.

The amount you spent in the day should surely not exceed the amount you earned. At least not habitually. Obviously, there are days when you must make a large payment on something. That's why you're keeping up with your expenses for the week. Come up with an average of how much you spend compared to how much you earn. If these numbers come up even you're in big trouble. Ball up that piece of paper and toss it in the recycling bin. It should feel cathartic to start from scratch. Start reducing your daily and weekly expenditures. It's the only way to plan realistically for the future.