Every adult has worried about money. Anyone who says they haven’t is kidding themselves. Money can’t buy you happiness, but it sure as hell helps. Developing money management skills is one of the most important things you can do to set yourself up for success in adulthood.
For as long as I can remember, my parents told me to live below my means. When I was a kid, I thought everyone knew that, but as I grow older, I realize that not everyone was given this very important advice. I want to pass this wisdom on to you, and how to do it. After reading this, you hopefully won’t have to wonder where all your money went.
The Best Money Management Plan
The best money management plan is simple: SPEND LESS THAN YOU MAKE. If you struggle with this, you’re not alone. 38 percent of Americans have credit card debt, which is a major indicator that they are spending more than they make.
First, we are going to help you identify if you are overspending in the first place.
Step 1: Track Your Income
For one month, track every penny you make in an Excel document or in Google Sheets. For those of you with a salary (you go Glen Coco! Adulting brownie points), this is probably easy because it is the same every month.
For those of you who work hourly, have nontraditional jobs, and/or have side jobs, this is an extra important step. Record all the money you make from every income source. It may not be the same each month, but that’s okay. Just record this month’s for the sake of the exercise.
This is what my personal Google Sheet headers look like for this step:
Date: The day I got paid.
Amount: The amount I was paid.
Method: The method by which I made the money. Examples: wages, tips, Poshmark sales, babysitting, etc.
Paid?: Have I been paid yet (sometimes I know I’m going to get paid ahead of time and want to make sure I don’t let it slip through the cracks)
Notes: If I’m selling something, I’ll usually make a note of what I sold. You can use this for whatever you think is important.
Make sure you’re putting in the amount of money you’re actually able to spend, that is, after-tax income. If the government takes it, sorry, you can’t use it. Hopefully they’re spending it on something good.
Now you’re on your way to finding out how much you’re making! You’ve made it through Step 1.
Step 2: Track Your Spending
For the same month, record every penny you spend in an Excel document or in Google Sheets. I do this myself (…most of the time). Here are the headers I like to use:
Date: The date I spent the money. I like to start on the first of the month, but you can start recording your spending on any day.
Where: Usually where I spent the money, but sometimes what I spent it on, like rent or my phone bill (which, full disclosure: I share with my mom to save money). Examples: Target, Macy’s, Vons.
Method of Payment: Which card, account, etc. I used to pay the amount. Examples: Venmo, Wells Fargo Visa, Checking Account.
Category: This is important because this is going to help you find out where all your money is going. Create 5-12 categories you spend money in. Here are some examples you can pick from to start:
- Household – things like cleaning supplies, home decor, even clothes hangers
- Education – if you’re not in school, this can be ambiguous. I include my Audible membership here.
- Health – doctor’s visits, medicine, etc. I also include my Planet Fitness membership here.
- Restaurants/Entertainment – anything you buy when out a restaurant, bar, movie theater, etc.
- Shopping/Clothes/Beauty/Personal Care (girls need a lot of things in this department okay)
- Gas/Car – Cars cost you in more than just gas. Record gas plus maintenance costs, insurance, car payments, and anything else you spend money on your car for.
- Donations/Gifts – This gets really expensive in December for many people. I count any donations I made or the costs of gifts I got for anyone here.
- Credit card debt payoff – I will say this a lot, but please avoid credit card debt. If you have any, pay it off as soon as possible because it’s expensive.
- Student loan debt payoff
- Other debts
Feel free to pick and choose the categories work best for you. Leave a comment with the categories you’re using! Low key hoping nobody has a “drugs” category…shit’s expensive. But we can work on that.
Starting on the line under these headers, record everything you pay for, whether it’s through cash, venmo, credit/debit, or whatever method you use. You can do this at the end of each day, week, or all at once at the end of the month. I recommend doing this weekly for a month so that you don’t forget about anything. When you have a few different methods of payment, it’s easy to lose track of what you’ve really spent.
Congrats! You’re on your way to managing your money better. Knowing your spending habits is a big step in your adulthood journey.
Next week, I’ll be posting about what to do once you’ve collected this information. Don’t all jump out of your chairs to read it.