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Where Did All My Money Go? – Part 2

A jar full of coins, seen from the top.

In this article, I’ll discuss how to create a two week spending plan so that your money will last until the next payday. (For tips on determining your expenses, see part 1.)

Let’s assume you’ve now figured out your spending, and your monthly fixed expenses look something like this:

  • Mortgage/Rent                                $1,100
  • Groceries                                            $   400
  • Power                                                   $   105
  • Heat                                                      $     95
  • Cable/Internet                                 $   150
  • Cell phone                                          $   105
  • Car insurance                                   $     75
  • Credit card payment                     $     60

Total:                                                     $2,090

 

I know this is not a comprehensive list, and I also know that it doesn’t include anything like entertainment or unexpected expenses.  I have included only fixed expenses. These numbers also represent a single person living alone.  When you calculate your own numbers, make sure you include all household income, as well as all fixed expenses related to children, such as daycare, soccer, etc.

So you now know that your fixed expenses total $2,090.  Let’s assume that your annual income is $45,000 and you get paid twice a month.  Taking into account tax deductions, CPP and EI contributions, you would probably be taking home approximately $2,900 per month, give or take, which is $1,450 per cheque.  I would suggest that you divide your monthly fixed expenses in half, which is $1,045, and set aside $1,045 out of each of your two pay cheques to pay these bills.  I actually have a separate bank account where I keep all the money for my fixed expenses.  This account is not linked to my bank card, so I can’t accidentally spend it.  And I also know that I cannot take money out of this account for anything else.

Once you’ve deduced your fixed expenses from your cheque, you are left with $405 out of each cheque to pay for all your other variable expenses, like gas, entertainment, etc.  This amount is what you can spend over the next 15 days until your next cheque.

The final step is to divide your $405.00 in half once again.  This gives you $202.50 to last you for approximately 7 days until your next paycheque.  Keep $202.50 in your account that’s linked to your debit card and then move the remaining $202.50 into your savings account.  If you don’t have a savings account, you should get one.  Just find one where the bank fees are not too high.

Okay, now all your money is divided up.  Now comes the hard part – the discipline!  You must have enough discipline to spend only the $202.50 during the first week.  If you can exercise that discipline, you will be rewarded with $202.50 in your savings account to spend the next week.  And if you were really disciplined, you might even have some of that original $202.50 left over!

I also suggest that you always put some of this money away into long-term savings, as well as short-term savings.  I know it’s not easy, but it really needs to be done.

Please note that this is a very bare bones outline of one way to manage your paycheque.  I know that I have made this seem very simple and straightforward.  I also know that people have many more expenses than what I’ve listed here.

There are many different methods out there.  I have chosen to write about this one, because this is how I manage my money and it seems to work for the most part.  Having said that, there are certainly times when we’ve spent too much in one week and had to stay home and watch TV the entire week before payday because we blew two weeks’ worth of spending money in one weekend.  But live and learn!

I hope this method helps you make your money last until the next payday.  Good luck!

Article by freelance writer, Sharon Skwarchuk.

Where Did All My Money Go? – Part 1

paper showing finance, saving, and computer

How many of you have eagerly looked forward to payday, only to discover three days later that you’re already broke again?  Probably a lot of you!  This can be a common theme for people struggling with their finances – you always get to the end of the money before the end of the month.  And you can’t seem to figure out what you spent the money on!  Why does this keep happening?

It’s likely because you aren’t paying attention to what you’re spending.  Debit and credit cards make it really easy to thoughtlessly spend money. But using cash is often not any better, as it’s harder to track. So regardless of your preference, you need a good way to track your spending closely.  You need to record everything that you spend your money on, whether it’s $200 on groceries, or $3 on a coffee from Tims.  EVERYTHING.  You can do this different ways – you can write it down in a spending journal, carry a little notebook with you to record everything, or you can make a list on your phone. 

However, my favorite way is to use an app that keeps track of your spending.  There are a lot out there, but the one I use is called Expense Tracker.  It lets you enter your income and your expenses into different categories. Then it uses this information to create charts so you can see what you’re spending each month.  For example, you can create a specific category and then assign it a color.  Do this for all of your spending categories – groceries, cable, gas, etc.  Once your information is entered, the app will then create a colored pie chart or bar graph incorporating all the different categories, so you can see easily how much of your money is going to each category.  It will also give you a bar graph if you rotate your phone, so you can do it either way.  It’s a really handy app, and it lets you add additional categories so that you can tailor it to your needs.  And because it keeps a running tab of what you’re spending on each category each month, it really helps you see where your money is going.  There is also an upgraded version that you can buy for a few extra dollars which lets you input recurring expenses, like your mortgage payment.

So you need to track all of your expenses for a month or two (two is better).  Once you’ve done this, then you’ll have a better idea of what you’re spending on different things.  Now you can start figuring out how to make the best use of your money – do you really need to go to Timmy’s every morning and spend $3 on a coffee?  Wow, am I really spending $50 a month on lottery tickets?  Or you’ll notice that you’re not actually putting as much money into savings as you thought you were, or you’re spending way too much money at the App store.  All those little purchases for $6.99 or $2.99 can really add up! 

Another feature I like is this:  because you can also put in dates for each expense, you can tell if there are days where you spend more money than other days.  You can even sort your expenses by date.  I discovered that we typically spend the most money on Fridays and Saturdays after a payday, so I am now consciously making an effort to watch my spending on those days.  Instead of going out Friday and Saturday, maybe we’ll just go out one day and not both.  I also try to have days (during the week is easier) where I will not spend any money at all, which means no stops at the grocery store, no buying gas, no spending money at the App store, that kind of thing.  If you can string together a few days where you don’t spend any money at all, that’s even better!

So go ahead and start tracking your spending whichever way you chose.  In my next article, I will tell you how to take the information that you’ve gathered and use it to create a spending plan for the two weeks after payday, so that you don’t always end up broke by Monday.

This article is by Sharon Skwarchuk, freelance writer. 

Meena’s Note:
I like to use tracking methods that are cheap, easy, and electronic. I’ve experimented with Mint and used You Need a Budget for a while. But this year I noticed that banks are getting into the tracking game. I bank with ATB and they include a great tracking option. You can create categories, budgets, and use your phone app to see where you are at for the month.