5-Week Financial Fitness Challenge: Week One
With any fitness challenge, the first step is determining what your current level of fitness is and building a regimen from there. For the first week of your financial fitness challenge, we want you to focus on assessing your current financial situation. Financial fitness, says Marc Pinet, Wealth Management Advisor, Assante Capital Management Ltd., “comes down to knowing what is coming in and going out.” He explains: “Make a list. What are my financial priorities? What debts need to go away first?”
Your action item from this week will be to track your expenses so you have a clear idea where your money is going. You can keep an expenses spreadsheet or check out an online tool like Mint to start tracking your spending. Generally, we would suggest tracking for a month, but even tracking for just a few days can be eye-opening and can help you see where you can tighten up your financial muscles. “Having a budget,” Pinet advises, “is the first step in financial literacy.”
These are your necessary expenses that are consistent each month. For example: mortgage or rent, car payments, student loans, insurance, etc. These will be the same cost month to month so you can easily track them.
Variable Essential Expenses
These are your necessary expenses that may cost a little more or a little less each month. For example: gas, groceries, utilities, phone bill, etc. For these expenses, you can check your account statements for the past 6 months to get an average of what these payments are.
These are things you don’t necessarily need for living. For example: eating out, trips to the coffee shop, Netflix, etc. These can be things that make life fun and enjoyable, so don’t automatically cut everything out of this category, but cut down. Make a list of what’s most important to you and that will help you decide where you can save.
Now that you’ve got a week of tracking your expenses under your belt, you may already see some patterns – good and bad. Keep tracking your expenses as you will be able to monitor your progress and adapt your financial habits as necessary. Above all, says Pinet, “Make sure your money is aligned with your goals”; if it’s not, “ask for advice.”
Check out the Week 2 Blog on Setting Financial Goals.