Part Two of the Financial Preparedness Series
Do you track your spending? This is the step everyone overlooks and it leads to failure. A good recipe will make or break your cupcakes, or budget. Not all recipes are created equal, and some just have a lot of extra stuff that you just don’t need – fat for instance. Granted this is part of what makes cupcakes taste so good, but its also what makes them not so good for you.
The same principle applies to your spending. So step one is to track your spending and where your money HAS been or IS going, or as we are calling it, identify your ingredients.
Browse through cookbooks and recipes
There are two ways to do this.
1) If you keep ALL you receipts then sit down and categorize all your spending and income from the PAST three months.
2) Track all of your spending and income for the NEXT three months.
3) Or a combination of both
I recommend using a spreadsheet on the computer so you can easily compare your spending side by side. Plus they usually have a built in calculator. For Excel use the formula =SUM(cell#,cell#) to add (example =SUM(H7,H8)) or to add a column =SUM(cell#;cell#) (example =SUM(H7;H13)). We’ve included a template for excel to help get you started, just use your good friends “copy” and “paste” to add categories.
Download our Track Your Spending Worksheet
Analyze the ingredients
Any of the above methods will work as long as you do the following steps to determine the best recipe and any changes that you need to make for the best cupcake money can make.
- -Track EVERY PENNY – it doesn’t matter if its cash, credit, debit. If you spend it you write it down and assign it a category.
- -Get down to the nitty gritty – you can’t make a low fat cupcake if you don’t identify where your calories are coming from. Don’t just assign things by store (Winco = grocery for example). Itemize your receipt and be HONEST. Junk food, hygiene, household, diapers, etc. This is important because until you realize how much you’re spending on things you don’t need (or that aren’t good for you) you won’t have the motivation to change your recipe. Think of this like reading the label on a package of cookies at the store, they don’t look so good when you discover that 400 calories is just 1 lousy cookie.
- -Define each category – this will keep you accountable and avoid facing the truth. My husband always laughs when I say that cake is health because it has flour (grain), eggs (protein), and milk in it. It you don’t have it defined it will just end up in miscellaneous and won’t get cut or recognized for its unhealthy ingredients.
- -Write it down – you’re going to want to total every category and compare them each month. This is how we develop our final cupcake recipe and discover those hidden ingredients that make our cupcakes so sugar and fat filled.
- -Use Color coding to help identify where you went in the hole, used your credit card, how you paid for things, and your final totals.
A Little Encouragement
Here’s where I get to play cooking show host and pull out the finished product (or in this case step). I’ve been working on this step for the last couple months and just finished my own analysis in preparation of creating my own perfect cupcake recipe. I’ll admit the first month was the most painful. The truth hurts! But as I continued to track my spending and was more aware of how much I spent in some areas I was really surprised to see how just that knowledge alone helped lower my spending. And when you can literally see those results it’s a great feeling and very encouraging.
Here is a list of the categories (along with their definitions) that I came up with for my family.
- -Income – any money that comes our way – cash, gift, paycheck, odd job, sale of something
- -Tithing – 10% of our income we pay to the Lord and he takes care of the other 90%
- -Fast Offerings – we fast once a month and pay a generous fast offering to help others in need
- -Fees and Overdrafts – any bank incurred fee or overdraft transfer made to our account and its corresponding fee
- -Transfers – all money transferred between accounts
- -Grocery – all good healthy food (labeled for WIC, cash, credit card, debit, etc)
- -Junk food – extras – donuts, ice cream, candy, etc
- -Eating out – dates, take out, on the road
- -Household – cleaning supplies, stamps, hygiene products, toilet paper, etc (non edibles), I have diapers under this category, but I will be adding them as a category with the new baby coming and in future tracking.
- -Miscellaneous – doesn’t fit anywhere and therefore expendable
- -Gifts – anything bought as a gift and any corresponding shipping costs
- -Recreation – any family or date. Includes housing, travel, food, all costs in relation to that activity
- -Medical – doctor visits, medicine, lab fees
- -House – home repair, furniture, yard or maintenance
- -Movies – rental or purchase
- -Craft – sewing, knitting, craft supplies, etc
- -Work – anything related to work
- -Car – maintenance and repairs
- -Car Insurance
- -Rent / House Payment
- -Credit Cards – payments
- -Life Insurance
- – Internet
- -Cable or satellite
There are a few things that I discovered through my ingredient tracking. I hope this gives you a little encouragement:
1) I was losing $15 a month in bank fees just to bank there (love that!)
2) I could save about $30 a month if I didn’t feed my donut addiction
3) Even though our large family does not eat out often, between date night and lazy nights, this one expense added up to a third of my grocery budget
4) Gift giving will get you! Scale down for Christmas and go small for birthdays and weddings
5) My husband spends more on clothes than me and the kids combined. Funny!
6) If I cut movies and book buying it would leave a good chunk of money free for other things.
This should get you started on your own ingredient list, and create an eye opening experience. Please comment any other “ingredients” that could be added to the list here on this page. You can also download this Simple Monthly Budget to get started. Of course share your encouragement and discoveries with others in our comments or through our Facebook page.
Other posts in the Financial Preparedness Series – Get Financially Prepared – Identify Your Spending – Assess needs vs wants – Create a budget – Saving Money – Counting Cupcakes & Financial Preparedness
These books by Dave Ramsey have been crucial in helping our family get out of debt. See them on Amazon: