Money management can be a challenge when you're out of work. If you are going to effectively manage your finances, it will be important to know exactly how much money you have coming into your household and how much is going out. When you experience the reduced income that comes with losing your job, it's doubly important to track your income and expenses.
If you find yourself in a difficult financial situation, itís crucial that you fight the urge to put your head in the sand and avoid the issue. Some people hide from their financial realities, never checking credit card or bank account balances because they're afraid of the truth. That approach only leads to increased debt and financial stress. The only way to be in control of your financial future is to open your eyes wide to your current financial situation.
To start gaining control of your finances you can:
- Track everything. Write down the money you have coming from every source of income as well as all of your expenses. Don't cheat by leaving out a dollar here or there. It can be pretty surprising to see where you actually spend your money.
- Be realistic about your spending. If money is tight, you'll aim to be frugal, but also be realistic about how much you need to cover the essentials, and don't set yourself up for failure.
- Assess every one of your expenses to see where you can reduce your spending. Just because an expense is fixed, that is, it recurs regularly, doesn't mean it can't be eliminated or reduced.
Tracking your income and expenses is absolutely crucial to financial management. It's the only way to know how much you have, how much you're spending, whether you're spending more than you're making and where you can cut back on expenses.
How to Track Your Income and Expenses
I'm a big fan of using household budget software for tracking income and expenses. Yes, buying the software is a bit of an expense, but it's a one time expense that, in my opinion, pays for itself in that it helps you to make much smarter financial choices on a regular basis.
I use the software regularly, and I always know on a daily and monthly basis exactly how much I have to spend and where my finances are headed on a long term basis. Tracking our household income also helped me to feel comfortable that we'd be o.k. financially at a point when I lost my job. I was able to review all of our past household expenses, find ways of cutting back and determine exactly how much we needed to meet our financial obligations.
I've tracked my household budget for so long, I can't imagine ever being without that kind of information.
When you start using household budget software, it takes a little time to set everything up initially. It's worth it though, because once you enter all of your financial information, it takes very little time to keep your financial information up to date. You'll know where your money is going, how much you have to spend on a day to day basis, and where your finances are heading for the long term.
I've used both Quicken and Microsoft Money at different times to track my household budget. Both have great graphs and reports that can help you to understand your financial big picture and motivate you to keep on track with your financial goals.
If you're more of a pencil and paper kind of person, watch for next week's article, which will include more information on personal budgets and a free budgeting worksheet.
To get more details on the features and benefits of Quicken or Microsoft Money, you can check these two links.
Intuit Quicken 2008 Deluxe - PC
Microsoft Money 2007 Deluxe - Complete Product - Complete Product - 1 User - PC