Evaluating the complete financial picture was one of the first steps I took in our debt budgeting journey. It began by making a list of all expenses. First, I captured all fixed expenses within the past year. Fixed expenses are bills that must be paid regularly on a weekly, monthly, quarterly or yearly frequency. Examples of fixed expenses include rent or mortgage, utility bills, credit debt, auto loans, insurance, student loans, etc.
Fixed expenses will usually remain the same or may fluctuate slightly, which is most likely to occur with utilities. Generally, it’s often easiest to budget for these costs due to the nature of fixed expenses. Most often, fixed expenses account for a large portion of your total financial picture. It can also be the simplest group to target in your budget.
Method to Catalog My Fixed Expenses
I used a notebook in the past to identify the expenses to be paid each paycheck. I was looking at a small chunk of expenses when I paid the bills for that period. Honestly, I never looked at it all holistically. Looking at the fixed costs for the entire year really opened my eyes and allowed me to see the larger financial picture.
First, I went through my old notebook and wrote down every expense name that I came across. I created a Fixed Expenses Tracker worksheet to list all expenses. This worksheet provides a high level overview of all expenses on one sheet. Initially, it only contained the expense name and frequency since I already knew that info. I accessed my accounts online to gather information for the other details on the worksheet. A snapshot of my fixed expenses is below and shows my starting point in February 2020.
Tracking Cash Flow and Spending Habits
In order to complete the other half of this puzzle, I had track my cash flow and review spending to see exactly where my money was going every paycheck. I needed to take a good look at everything and determine where I had to cut spending or make adjustments. Again, it was crucial to view it all together holistically to see the complete financial picture.
I’m going to travel back in time for a bit to the time when I opened my first bank account many years ago. I received a welcome packet after I successfully opened my account. There were several items in the packet including the enrollment paperwork, a box of checks and a checkbook transaction register. I used the checkbook transaction register to track all of my banking transactions including deposits, withdrawals, transfers, checks, etc. Initially, I was very diligent about tracking every activity that occurred in my account for several years.
Then over time, I began to access my account online and slowly drifted away from my previous habits. I started to make payments online rather than writing checks. In addition, I was using my debit card to make purchases so I was using checks less frequently. I could access my online account at any time to view the transactions I made. This seemed beneficial because it was tracking my transactions automatically and was also calculating my account balance for me. It was a time saver, I didn’t have to track it manually myself and it seemed like a positive change. Now I realize that it was actually a huge mistake.
Old Habits Become New Again
I decided that I needed to take accountability and ownership of my spending. The best method for me is to manually track it with paper and pen. I recreated a modified version of the checkbook transaction register I used in the past.
It’s an expense tracker that I’m using for all of my checking accounts. I track spending for the entire month beginning with the first paycheck I receive that month. I record transactions as they occur which could be a span of a day or a week, depending on my spending during that period. Instead of waiting for the transactions to post on my account, I’m capturing it upfront and checking it off when it posts online. I know exactly how much money I will have in my accounts at all times. This eliminates double-guessing my balance and I avoid overdrafts. Overdrafts were infrequent before but I’d be lying if I said it never happened because it did on occasion. When it happened, I was over-stressed trying to figure out how to deposit or transfer money to cover for the overdraft. I hope I never have to go through that again.
This snapshot below is a first draft of the expense tracker. It was very beneficial with keeping my spending on track but I identified a few improvements to enhance the tracking process.
Within 1 1/2 months, I was able to use the data collected to evaluate and analyze my spending. I quickly identified areas where I could cut spending, lower costs and eliminate unnecessary expenses.
Utilizing the Expense Tracker
I track expenses monthly for all three of my checking accounts. I have two personal checking accounts that I use solely for myself and my own expenses. Plus, I have a joint checking account that I share with my husband for the bills that we pay together. Some of these joint expenses include mortgage, utilities, and car insurance. My direct deposit is set up to automatically split my paycheck into all of these accounts.
It’s easier to track expenses for the three accounts separately on its own Expense Tracker worksheet. Tracking each individual account helps me to quickly reconcile expenses and balances. I tried to track all accounts on one worksheet early on but it was hard keeping the balances accurate. It also required extra time to calculate to the ending balance for each account when I needed to know how much money was available. It became manageable after I tracked each account on its own monthly tracking worksheet. I’m able to easily see the full financial picture by doing it this way.
Every month begins with the closest pay date for the paycheck I receive in that time frame. I am paid bi-weekly so I’m tracking my expenses for two paychecks in most months.
Example of Monthly Tracking by Paycheck
- I created three new monthly October 2020 Expense Trackers for each checking account beginning on 10/2.
- 10/2 was a pay day and that paycheck went toward October’s expenses.
- My next paycheck was on 10/16 and October’s expenses were tracked through 10/29.
- The following paycheck was on 10/30 and that check was for November’s expenses. November’s Expense Trackers began on 10/30.
I also incorporate a color-coding scheme to easily track transactions for each type of expense. Some of the regular expense categories include food, debt, utilities, health and pet. I use a designated highlighter color for each category and use the same category colors every month for consistency.
There are several different worksheets used in conjunction to help keep track of expenses and debt payments. Taking ownership and accountability of spending has been extremely helpful and astonishing.
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