Taking Control of Your Finances – Part I: Building Good Habits

I’m Ryan Kerst, Bill’s oldest son, and I thought I’d tackle a bit more information pertaining to graduates that I’ve found useful over the past few years. When I first got out into the adult world, things like car payments, rent, and groceries, started as an unorganized mess that I just sort of hoped I had enough to cover with each paycheck. I’ve since done a lot of research and formed better habits that have allowed me to make serious dents in my school loans and begin saving up for multiple occasions, as well as set aside enough for monthly expenses. Hopefully this will be as useful for you as it has been for me!

The best financial habit I’ve come across is tracking everything I earn and spend in a spreadsheet. If someone were to ask you how much you spent on gas or food within the last month, would you be able to tell them? A few years ago, I certainly couldn’t without going to my bank statement.

Part of controlling your finances is keeping track and knowing where your money goes. It’s more than just saving for retirement or vacation. Managing your finances is about having enough stored up to cover a rainy day or make a down payment on a new car without causing a panic. We’re going to take a look at some basic parts of the process pertaining to taking control of your finances with a permanent solution.

Managing money is one of those things that everyone does, but few do it well. It’s easy to fall into the trap of, “I’ve just been paid and there’s money in my account,” or, “I don’t need it but I can afford it.” The worst financial mistake you can make, no matter how much money you have, is blowing a budget out of the water simply because you can.

So how do we go about taking this problem and building a good habit in its place? The first step is to keep track of everything. There’s lots of software out there to use, from the basics like an Excel spreadsheet, to budget programs like YNAB and Mint.com. Your ultimate goal is to log what comes in and what goes out. You need an income column to record your paycheck(s), and an outgoing column to log expenses. So try this beginning with your next paycheck, (1) write down exactly how much you brought home then (2) write down how much you spent every day. Don’t skip anything, this only works if you’re honest.

After a month, add everything up and see if you’re earning more than you’re spending. Are you cutting it close? You might be shocked by the results but that’s alright. This is just a kick-off to developing good habits.

So after your month is completed, look at the results. How did you do? Did you find that you had money left over, or were a little short and pushed up the credit card balance to make up the difference?

If you took the challenge and did the budget, send me an e-mail, ryan@communityfirsttrust.com. You don’t have to tell me anything about your income or your results, just “Hey, I kept up with my budget.” If you send me that e-mail we will send you something in return (who doesn’t like free prizes!). We will not use your e-mail for any other purpose; this is just to reward anyone interested in making life better and a little easier. Be sure to check back next month as we talk about what to do with this budget information.