Where does it all go?

This is the fundamental question at the heart of managing your money. Most people - even the most responsible ones - suffer what I call "leakage." That money that gets spent but you don't seem to remember where, or what you actually got for it. It's my belief that before you can do any of the other good things in money management - budgeting, cutting expenses, paying off debt, or establishing an emergency fund - you need to know what you are actually doing with your money. That way you can find where your leakage is going, and then set a realistic budget that you can really stick to.

Traditionally, this kind of tracking has been done by hand. The more accounting-oriented might have actually kept a ledger, while most people just kept tabs by balancing their cheque book. Of course, most business was done in cash, so it also used to be much harder to track each item spent, but, since you couldn't just run into the negative in tight moments, it was also harder to get into trouble. Computers have made life so much easier, and there is now a huge number of programs out there that will help you do this. I have put together a list of programs that I am aware of, something to suit every price range.

Starting Up

Now that you have software to manage your money, where to start. The basics are pretty straighforward:

• Set up your accounts
• decide how to categorize your expenses
• set up scheduled transactions for your predictable expenses
• begin entering every transaction

The central goal behind this website is to teach a basic, simple system for managing your personal finance.  A system that anyone can implement, and that will make a difference in how you live your life, without the diet effect.  The diet effect, which applies both to money and to eating, is what happens when you try to just cut off all your impulse buys - or comfort food - and then quickly give up when you give into an urge or two.

To that end, I have developed a five step program for money management.  Each step builds on the last, and by the end of the program, you will have an excellent idea of your total financial picture, and a clear path to meeting your goals.

Step 1 - Tracking Your Spending

Before you can set a budget, you need an idea of what you are currently spending.  In this step, we will set up a basic home accounting system.  While I am now an accountant, this is a system that I have been using since I was a teenager, long before I had any formal accounting education.  You don't even have to be good at math - that's why we have computers.

This is the core of managing your money.  If you get no further, learning to track your spending will still help you, by telling you where you might be "leaking" money - spending money without even realizing you're spending it.