Understanding Where Your Money Goes

In order to make educated decisions about how you are going to make ends meet you must start by identifying how much you earn and analyzing how you spend your money. Most people can easily identify the income part of the equation by simply looking at their pay stub. If you have several jobs or earn some of your money in gratuities or from other sources you'll need to make sure you include everything if you want to get an accurate picture of your income.

The same is true when analyzing how you spend your money. Don't leave anything out. In addition to your household, clothing and grocery bills make sure you include irregular bills that you only pay a few times a year (like car insurance) and any cash you are spending daily for transportation, business lunches, morning coffee, cigarettes, etc.

Monitor Daily Incidental Spending

    • Get a receipt for everything you spend, and put it in a box or folder at the end of every day. Add it up at the end of the week. Categorizing expenses (food, entertainment, gas...) will help you to understand where your money is going.
    • Carry a small notebook and jot down expenses as you spend your money.
    • Keep an electronic tally going on your phone or computer.

Monitoring income and expenses for a month or so  will help you see where your money is going. Now, you must try to create a budget that you can live with. Use this budget worksheet. You are not alone if your expenses outweigh your income. Perhaps there are some things you can do to remedy the situation a bit.

Money Saving Tips from Financial Advisors

Distinguish between your essential expenses and the expenses you incur for things you want; then cut what you can from the non-essentials. Essential expenses include things you must pay for such as:

    • home mortgage/rent and all things associated with this (property taxes, insurance, electric/gas, water/sewer, telephone, maintenance)
    • transportation costs - public transportation/car expenses including loan payment, insurance, gas and oil, maintenance
    • medical expenses including health insurance, doctor and dentist charges, prescription costs, therapy charges
    • food costs
    • childcare
    • college loans
    • clothing costs for a basic wardrobe
    • debt charges including interest payments

Expenses that fall in the category of "wants" include anything that you would like to have but don't truly need such as:

  • cell phone
  • cable TV
  • dining out
  • hobbies/clubs
  • vacation, movies and other forms of entertainment
  • new clothes every season
  • cigarettes
  • alcohol
  • gifts
  • luxuries you can live without

Pay off your debt as soon as you can. Look at the interest rates you are being charged for your credit cards, home equity loans, car loans, college loans, mortgage and any other debt you have and pay off the loan with the highest interest rate first unless the interest paid can be deducted from annual income taxes as is the case for your mortgage loan. Make sure you continue to make your minimum payments on the others while you do this. Once a debt is paid do not use the source again if you can avoid it - otherwise in short order you will be right back where you started.

Explore ways to cut costs on essential expenses. Use coupons when buying groceries. Buy clothing from discount stores or when it goes on sale. Learn about energy saving tips. You may be eligible for:

Find more money saving tips at websites devoted to financial literacy.



Page last modified/reviewed on November 10, 2016

If you know of additional resources that would be appropriate to include in this section, please let us know by contacting us via e-mail at info@nj211.org

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