Between the added expense of dealing with the crisis and paying for our vices to cope, we can end up in a loop that is hard to get out of.
Right now, our entire country is in a state of crisis, and we are all feeling the hit to our finances. During these challenging times, it's really important to understand where your money is going.
First, gather the last 1-3 months of your credit card and bank statements. Print off hard copies. Once you have these together, it's time to make sense of the data.
Go through each statement, and determine your recurring fixed (same every month) expenses, such as insurance, mortgage or rent, car payment, cable, and internet.
Then identify your recurring variable (changing every month) expenses, such as electric, gas, water, and groceries. If you are using statements from more than one month, calculate the average.
In case you need a refresher: To calculate the average, add the totals for each month together, then divide by the number of months. For example, if your gas bills for three months are $71.55, $67.82, and $73.47, do this to get the average: 71.55 + 67.82 + 73.47 = 212.84 ÷ 3 = 70.94
Next, break down your remaining expenses into their respective categories. I recommend separating categories like "eating out" and "groceries," instead of lumping them together into "food."
This can be a tedious process. Try using different colored highlighters or pens to mark the different categories. This can make it easier and faster to get through your records.
Now, take a deep breath. Put your list in a drawer, and take a break. Taking a hard look at where you are spending money is overwhelming and stressful.
Next week, we'll talk about how to create a plan from the information you gathered. Until then, try to relax and spend some quality time with your family.