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Picture of Find out where the money went!
Do you ask yourself where the money went at the end of each week? Do you ever come up short on paying for bills and have to use a credit card, payday loan place, or borrow a ten off somebody until you are paid? These are signs that you are living beyond your means. Poor people do it, rich people do it, and five-year-old children do it. Here is how you stop.

All photos in this instructable are of my art work and are Copyright Lisa M. Yarost. All rights reserved. Please do not use these images elsewhere without permission! Thanks!
 
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Step 1: Write it down!

Picture of Write it down!
Find a notebook that will fit in your purse or backpack. If you're a guy and you just carry a wallet, then tuck a sheet of paper in there each month and carry a pen or pencil, even if it's one of those little golf pencils. From now on, you are going to track every single penny you make and every single penny you spend, when you spend it. If you buy a coffee on your way to work or a candy bar from the vending machine, write it down. When you have a bill or a bank fee deducted from your account, write that down. If you find a nickel in the sofa, write that down too. You want to know exactly what is happening to your money!

Here's a way most people cheat, and you don't want to cheat: If you go to the grocery store and take cash back, do not write that down as groceries. You haven't spent it... just taken it out of your account. You need to track what you do with it once it's spent. Likewise, if you go to a superstore like Walmart for your groceries, don't put your new CD that you picked up in your grocery expenses, just because you paid for it with your groceries. You want to know where the money really goes!

Step 2: Spy on yourself!

Picture of Spy on yourself!
We've fast-forwarded a month. You have been dutifully tracking your spending, and now you have all this information. Take out your book or your sheets, and see what you've been up to. Find a set of highlighters or colored pencils so that you can classify your income and your out-go (spending).

I like to color my income in green, for some reason. :-)
When it comes to spending, you want to break that down into categories:
1. Fixed regular (like rent, subscriptions, car payments, student loans, insurance...)
2. Flexible regular (like utilities, transportation expenses, groceries)
3. Irregular (like unforseen medical bills, auto or home repairs, gifts, etc.)
4. Optional (Starbucks purchases, movies, alcohol, clothing, shoes, books, restaurants and fast food...) I like to put this category in red, because it's the one we need to watch!

Step 3: Add it all up!

Picture of Add it all up!
Holy cannolli, Batman! I'll bet you didn't think you would see so much red, did you? Remember, all that red is stuff that you chose to buy.

Now, add up all the income for the month, and write it in one column. Then add up each of the other categories, and write the totals in a second column. If your first column adds up to more than your second column, congratulations! You have made more money than you have spent this month! If your second column adds up to be more than the first, you have spent more than you made, much like the United States Federal Government.

Either way, you want to figure out how to get ahead so that the second column is smaller (or smaller yet) than the first.

Step 4: Is it worth it?

Picture of Is it worth it?
Go back to your list, the one with all the colors on it. It's time to go through and see how you feel about the value you're getting for your money. Next to each expenditure, place a symbol indicating whether you feel you should spend (or buy) more (say, on fresh veggies or donations to charity), less (maybe on a particularly unsatisfying fast food binge that was a result of being too lazy to pack your lunch), or the right amount (perhaps on your rent or for your dog's food).

Now, think about all of the things you marked that you want to spend less on, and come up with ways to do so. Do you spend too much money at the book store? (Guilty, as charged!) Then start using the library.

Do you buy too many lunches out or eat too much fast food for dinner? Stock up on frozen dinners or canned soup and sandwich fixings and make sure your lunch is ready the night before work.

Can't live without that horrendously expensive ColdStone ice cream? You might think differently once you consider the price difference between their stuff and a half-gallon of even the best grocery store ice cream.

Step 5: Apply your knowledge!

Picture of Apply your knowledge!
Now that you know you will have to answer to yourself for every penny you spend, you can decide *before* you spend your money whether it is worth it to buy lunch at Wendy's three times a week, whether you really want to spend $20 a week on Starbuck's coffee, and whether going to the movie theater is really $8 better than borrowing a DVD from the library.

Knowing that you will have to write those expenses down in order to evaluate them at the end of the month may give you just the amount of time you need in order to change your mind.

Step 6: Repeat!

Picture of Repeat!
Do this every month, and you will never wonder where the money went. In fact, you will probably have more of it. You may soon find yourself making extra payments on your credit card or student loans with the money you save, or maybe socking a little extra away for retirement!
I just finished reading "Your Money or Your Life" by Joe Dominguez and Vicki Robin, and they have a few things to add to that. You can also go to http://www.financialintegrity.org for their full 9-step program for reaching financial independence. Following those steps is my New-Year's resolution. Just tracking my money was last year's.
I've been using Gnucash to track all my income and expenses for 2010, and it works really well. Free, fully customizable, and generates some great charts to illustrate how my money keeps disappearing. :)
BTW, Awesome artwork. Probably some of the more productive uses for money I've seen.
Klynslis you are a genius! This is a great article. I wish I had read it long before now. I recently got serious about my money and it is paying off bigtime. It is truly amazing the money that the average household wastes on crap that is completely useless. Thanks for taking the time to write this instructable!

The most valuable tool I have found thus far: If you use online banking you can easily use software like Quicken, YNAB, or Mint.com to track your expenses and plan your budget. Once you get familiar with the software it is easy to not only track your spending but you can also forecast how much money you will have on any given date. Powerful stuff!
yofortune5 years ago
Thats doesnt seem good for the environment by burning paper.
shortone6 years ago
Where do you get all the money used in your photos??? Dang... It would be cool to get shredded money and make stuff out of it!
What about making a candle filled with coins? Would that be safe?
i dont know about safe but it seems like a fun idea.
klynslis (author)  Father Christmas6 years ago
Hmm... It sounds much safer than the shredded money. I'll have to try that.
Browncoat6 years ago
I was hoping this would teach us how to make that candle...
I doubt it was ever intended to be lit - as soon as the wax melts enough to expose the paper, each shred will become another wick, and the whole thing will go up rather quickly.
PKM Kiteman6 years ago
You say that like it's a bad thing- I suspect it would instead be super awesome.
klynslis (author)  PKM6 years ago
You know, with the reactions I'm getting, I may decide to make a video of this candle burning (outside, of course) that I could use as an art piece as well.
Hmm, if you're going arty, why not stand the candle on a large sheet of glass, then you could display the resulting wax-puddle as well. Possibly tastefully back-lit with a cold light-source?
klynslis (author)  Kiteman6 years ago
Verrry interesting, Kiteman! I have a mirror that would work well for that. (Front of an old medicine cabinet.) Thanks for the suggestion!
klynslis (author)  Kiteman6 years ago
You are quite correct, Kiteman. That's why that piece is called, "Money to Burn."
ac1D Kiteman6 years ago
Don't care at all. Admit it would be awesome to look at it while it burn. :-))
klynslis (author)  Browncoat6 years ago
I can't really teach anybody how to make that candle. Somebody would inevitably try to light it and burn their house down...and then it would be my fault for showing them how to make a candle filled with money. I'm glad you like the candle, though. Thanks for commenting!
me too
jeff-o6 years ago
Another thing to watch is your cable TV bills. Do you really need all those channels? I find I usually only watch the networks, and even then I watch TV too much. Trim the specialty channels and save 20-30 bucks a month!
shooby jeff-o6 years ago
www.hulu.com Unless you're a TV addict, there's no need for television anymore if you have a computer. It's a luxury to watch shows right when they come out, but unnecessary in many ways.
klynslis (author)  shooby6 years ago
Shooby, I agree. My hubby is a TV addict, though. He watches hulu and many other internet channels, and he still has a "need" for satellite TV.
shooby klynslis6 years ago
Crazy right? Internet + cable TV prices have not fallen in recent years, even though in many areas of the states they've been consolidated by companies such as Comcast. That tells me I'm being screwed, and I refuse to pay any more than I 'need' to. How much do you pay monthly for communications?
jeff-o shooby6 years ago
Too much, well over $100 for cable+internet+phone.
klynslis (author)  jeff-o6 years ago
Same here. It's nuts.
I'm the same! I only pay for my internet connection - No television bill for me.
klynslis (author)  jeff-o6 years ago
Great point! I may do another instructable later with more details about where to cut back. This one is pretty much about tracking and setting priorities for yourself. Thanks so much for the comment!
Yes I am one of the people who end up going, 'omg I'm broke before pay day!' I got used to my online banking with my old bank, it showed any and all charges to my account no matter how long it takes to take it from my account. My new bank does those nice little, 'one dollar holding charges" till the charge does go through and I've come very close to over draft fees several times in the past few months. Training myself to writing everything down will be a challenge, but it's something recently I've been trying to do lol
klynslis (author)  aliceownsj006 years ago
My bank has changed to the $1 holding fees, too. Annoying, even though I understand why they do it. ::grumble:: Thank you for commenting!
Ora6 years ago
Writing everything down is very useful. Right now I'm working on a simple PHP/MySQL script that will allow me to keep track of it on my server.
klynslis (author)  Ora6 years ago
I keep track of expenses on the computer, but there is something to be said for actually writing down what you bought with that $60 you took out from the fastcash withdrawal option on the cash machine. That's where the little leaks come into play, like snacks, sodas, lip gloss (especially for you guys hehe!)

Thanks for commenting!
very nice pictures and good instructable. I gota start doing this, maybe carry my pocket moleskine with me and jot everything down.
klynslis (author)  pyelitegamerro766 years ago
Thanks! You would be surprised at how much you learn in just the first month. If you can get yourself in the habit of doing this, you won't be sorry. Thank you for commenting!