The secret life of your money

Photo courtesy of Julián Rodriguez Orihuela

 

Your money has a secret life. You may think that you don’t know this, but you actually do.

Have you ever sat down and said to yourself, “I just don’t know where my money goes off to?”

Yeah, I thought so.

The mystery of your own vaults

Your money comes into and goes out of your life, often in a sneaky way, without you knowing where and when. If you’re like many people, you may lie awake at night worrying about its whereabouts.

I know all about this. But fear not! I am here to help you expose the secret life of your money, to bring it into the spotlight, to help you rest easy at night. It’s going to take a little bit of work, but the payoff in the end is worth it.

What you need to do is create a money sign-out sheet.

A foolproof plan

Your money sign-out sheet can be in a notebook, a spreadsheet, or even a text file on your computer or phone. Here’s how you create it:

Label the top of the sheet with the upcoming month and year. This is important, as these sheets are really only useful over a fixed period of time. A month is a good time scale to use.

Divide that sheet into three sections and label them as follows: Income, Bills, and Expenses.

Income: In this section, list all your projected incoming money for that month. Paychecks if you’re on a fixed income, expected commissions if you’re not. List everything and total it up.

Bills: In this section, list every monthly bill you have to pay. These are things like rent/mortgage, car payments/insurance (but not gas), utilities, phone, cable, Internet, Netflix, etc. I would also add savings and debt payments here. Yes, some of these may fluctuate a bit, but just put what you expect them to be. Total this up.

Expenses: In this section, list all categories of things you spend money on not otherwise covered in the Bills section. Here is a sample list, but please make your own:

  • Groceries
  • Restaurants
  • Transit/Gas
  • Clothing
  • Household
  • Fun (important!)

You’re almost done. Now we need a little bit of math here, but don’t panic. Subtract your total Bills from your total Income to get your total Expenses. In other words:

Income – Bills = Expenses

Now divvy your total Expenses value among your Expenses categories, based on what you expect to spend in each category in the upcoming month. (Don’t worry, you can always adjust this later.) Make sure that the math adds up!

Expenses = Groceries + Restaurants + Transit/Gas + Clothing + Household + Fun + …

Your sign-out sheet is now complete.

Sample situation

D. Tracy makes $2,000 in monthly Income. Here are her Bills (I’m making numbers up here, not saying they are realistic or anything):

  • $600 Rent
  • $200 Utilities
  • $100 Phone
  • $100 Internet
  • $50 Car insurance
  • $150 Student loan payment

So her total Bills is $600 + $200 + $100 + $100 + $50 + $150 = $1200. This means her total Expenses is $2000 – $1200 = $800. So she has $800 to divide among her Expenses categories, which she does as follows:

  • $300 Groceries
  • $100 Restaurants
  • $100 Transit/Gas
  • $100 Clothing
  • $50 Household
  • $150 Fun

You are the fuzz

So now, sheet in hand, you stand guard over your wallet. Whenever any money wants to leave, make sure that it signs the sign-out sheet. $30 dinner? Write down $30 in the Restaurants category. $40 item of clothing? Write that down too. (For sanity, always round to the nearest dollar.)

Anytime you spend money, it must be written down! Nothing gets out the door without being recorded.

If, when money wants to leave, you find that it would put you above the total that you had listed for that given category, you must yell HALT! and prevent it from going. That money is earmarked for another purpose, and must be held back.

If you do all this, you will have uncovered the secret life of your money. Now unmasked, it will be more cooperative and more understanding, doing what you tell it to do as opposed to what it wants to do.

Sleep well.

Have you created a money sign-out sheet?

Mike Pumphrey

Mike Pumphrey

I'm the founder and author of Unlikely Radical, a site to help people succeed with money, achieve their goals, and live intentionally.

I offer a free phone consultation to anyone who is interested in changing their financial narrative. Are you ready? Click here for details.
Mike Pumphrey
Posted on August 5, 2013