Have you ever thought about how much money you make literally down to the day. I didn't until now. I am trying to figure out a way to be more conscious about my finances so I thought maybe this would be interesting to look at. Right now, in the words of my mom, I live on a shoe string budget which means I make $0 to none amount of money. For transparency purposes, my expenses (rent, car payment, etc.) outweigh my income which is the ultimate no-no. The only reason I am still surviving is because of the support of my parents and savings.
I am using this time to get real with myself about my finances because financial freedom is my goal. This year, I started with a fresh start by paying off all my credit cards and got a great present of getting some of my bills paid. This was great because I can start from ground zero instead of in the negatives. Last year, I was in denial because even though I knew my expenses outweighed my income I still spent money like I was ballin'.
I have no idea what I am doing but I know that returning to that routine is not what I want. My first step to breaking this cycle is identifying my income versus my expenses.
Income
Let's look at what your girl makes. I only have one job and I have listed how much I get paid below. As I am on a bi-weekly pay schedule, I multiplied the number by two to get what I make in a month.
Streams of income:
- 1 Job: $549 every two weeks*2=1,098 a month (these numbers are after tax)
We aren't going to address how little I make but just know that living on your own with this amount of money is difficult. Moving on, what are your consistent streams of income and how much do you make? I only have one job so that is what I listed. If you have more than one job list all of them along with your income amounts.
Expenses
Now we are going to look at what we spend our money on. This is the fun part *wink wink*.
As I wrote this post I tried to divide the types of expenses to the best of my ability. If you notice a mistake, let me know because I am no expert not even claiming it.
Essential Expenses
The first type of expenses I classified are essential expenses which are things you need to get by day to day. Your basic necessities. I have used my expenses as an example.
- Rent ($525)
- Electricity ($40)
- Internet ($17.45)
- Car ($311)
- Phone ($45)
- Gas ($50)
- Groceries (Don't spend anything because I qualify for food stamps)
- Basic Personal Care ($50)
- Household Supplies ($30)
- Medications ($9)
Total: $1,077
Your Turn
Take the time to identify what your essential expenses are and how much you spend for each.
Discretionary Expenses
These are expenses that make you feel good. Your luxuries. I have listed what I typically spend on "extras". This list is going to be different for everyone. Also, this is the part where you have to be most real with yourself. It might hurt but to get on track and manage your finances better you need to identify your tendencies. For me, I was like "wtf?!" I spend that much money on clothes but who I am to lie to myself. My discretionary funds are:
- Clothes ($200)
- Eating out ($76)
- Transportation (Lyft or Uber) ($40)
- Amazon Kindle ($10)
Total: $326
I referred to my last three bank statements to get an estimate and I rounded up instead of down so that I could get a better picture of what I do with my money.
Other Possible Expenses
- Make-up/Pampering items ($Cost)
- Gifts ($Cost)
- Travel ($Cost)
- Subscription-based services ($Cost)
Your Turn
What are your discretionary expenses and what do you spend? List everything possible. Try not to judge yourself.
Periodic Expenses
These are expenses that you have that occur less frequently and sometimes they can bite you in the butt. For instance, every year I know I have to pay my car taxes but when they come around some kind of way I am always surprised. The periodic expenses I can think of are:
- Doctor cost or medicine ($varies)
- Car cost
- Oil Change ($30-$40)
- Tires ($Cost)
- Window shield wipers ($Cost)
- Car taxes (varies, pay once a year)
Total: Unknown because honestly my parents have dealt with these cost. I listed them because I know the transition for them to become my responsibilities are coming soon.
Your Turn
What are your periodic expenses?
Things to Take Away From This Post
You should be able to identify what your income and expenses are?
How do they compare to each other? Income - Expenses = _________
Personal Example:$1,098-$1,403=$-305
Do you expenses exceed your income? If so, we are in the same boat and there is a post to come on ideas on I have to offset this.
Resources
I have listed some resources that you can check out from experts in the personal finance field to learn more.
Rich Dad, Poor Dad (This is a book. The link will take you to Amazon but you can also check out this book from your local library.)