A friend took exception one day when I said that we spend $600.00 a month on groceries.  They said that I was full of **##.  That nobody spends that much money on groceries.

I then asked them how much they spent on groceries.  The answer was “We probably spend around $300.00”.  My friend couldn’t answer the question with any real knowledge because they don’t really know!!

That is the problem with trying to establish a budget.  Most people have no real, accurate knowledge of where their money goes.  They have even less idea of  “how much” they spend on each Expense.

Most people can list their Fixed Expenses easily, because they are the same from month to month.   But what about the many Variable Expenses?  Do you really think about much you spend on the Tim Horton’s or Star Buck’s coffee each morning?  Of course not!  That is just small stuff.  When it comes to your Financial future, even the pennies matter.

That is why, before you can sit down and take control of your money and future, you have to TRACK YOUR MONEY FIRST!!!  This is the first step in developing a working CASH FLOW PLAN (CFP)  It also gets you used to monitoring your money.

There are many ways to track your money.  The first business I opened, (almost 40 years ago) I tracked my money in the simplest way possible.  (it was before personal computers, and yes I’m that old)  I bought a 3 column ledger book.  You can still get these in any office supply store.  The book let me record the date, what the transaction was, whether the money was going OUT or IN and what the balance was.  I saved every invoice and receipt in monthly file folders.  It was a very simple system, and when I took it to my Accountant for the year end work, he laughed.  Yet he also admitted that it was very easy for him to find the information he needed and put it onto the year end statements.  You can use the same simple system for tracking your money.








Today most people have access to a computer and can do the same thing on a spreadsheet.  You can even set up the spreadsheet to do all the calculations for you.  All you have to do is keep track of your spending and plug in the numbers.  Or you can do what I do.  I let the banks computer track my spending,  Then I just take that information, and plug it into my tracking spreadsheet.  I do this by using my debit card for my transactions.   At the end of the week, I just download that weeks transactions, and copy and paste them into the right columns.  If your interested, here is a free link to the basic tracking sheet on goolge docs. https://docs.google.com/spreadsheets/d/14_d1o3SwtnekkMn4UDqVFBS3ZMLNxRhugfZtDlldeYw/edit?usp=sharing This is a very basic sheet but a good place to start.  There is far more detailed sheet that will soon be available from the site.  (for a small fee).

I have online banking, so I use the “download to a spreadsheet” feature to get the data from the banks computer onto mine.  You can do the same thing manually, using the paper Statement you get from the bank at the end of each month.  (That’s why they send you one!!!)  You just paste the Date, the Transaction (where from /where to) and the Money Out (Debit), Money In (Credit) and Balance into the columns on your spread sheet, or manually type in the data from the paper Statement.  Then take the value of each Money Out transaction and copy/paste that value under the right Expense  heading.  If you are using my spread sheet, you can see each column displays the running total of that Expense, and the percentage that Expense is, of your monthly Total Spending.  If you are going to use this spreadsheet, PLEASE, customize it to match your expenses and lifestyle. (if you are not comfortable doing that, I’ll help you with it.  Just get a hold of me through the “Contact” section.)

If you use online banking, you can go back at least 12 months and assemble this information quickly from old data.  If you don’t have online banking you will have dig out the monthly paper statements.  Either way, once you have at least 3 months of data, you will be able to start doing your actual Cash Flow Plan.  The more months of data that you have, the more accurate your data becomes.  To get REALISTIC data you need to have at least 3 months of tracking 6 to 12 months is better.

I am willing to bet, that when you have tracked at least one month’s spending you will find one place where you are spending way more than you thought.  Knowledge is Power.  As soon as you know where your money is going, REALLY, you will start having control of your financial future.  It is that easy, but it does require some extra work.  I usually do this on Saturday morning while the coffee is brewing.  Pick a time that is good for you, and do it at the same time every week.  If you do it for 21 consecutive weeks it will be a habit.

Once you have your totals for the month (or for the week) you really need to LOOK at the data.  How much are you spending on each Expense?  OMG look at what I’m spending on Clothes, Shoes, Books, Coffee, Tools, Eating Out, Entertainment, the Movies, the Bar, etc.  Any place where you might be spending more than you realized?  This exercise normally shuts down the “I can’t save $20.00 a month!” argument.

Your CFP is based on “AVERAGES”.  Your Expenses for each heading will not be exactly the same each month.  The Expenses that change each month are called Variable Expenses.  The Expenses that don’t change from month to month are called Fixed Expenses or Liabilities.  To figure out the AVERAGE of a Variable Expense you add up the Total of that Expense each month and then divide by the number of months.

For example.  Suppose that our “Eating out” Expenses were; $223.76 for January, $157.98 for February, and $297.45 for March.  Your AVERAGE expense would be; $223.76 +$157.98 + $297.45 equals $679.19, divided by 3 (number of months) equals $226.40 per month as an AVERAGE amount.  If the amount is always the same (like Rent) then you don’t need any math, just use the monthly amount as the average.  This is why the longer you keep track the more realistic the numbers become.

What if you have a month where one Expense is really high?  Say the car breaks down, and takes $300.00 for repairs.  That doesn’t happen every month. (hopefully)  That is OK.  That extra expense will be part of your average.  This is the first part of the Working CFP.  It may seem like a lot of extra work.  It is.  But is doing what you are doing now, getting you to wealth???  If it is not, you need to change something.  I am suggesting that this is a good place to start.