Note every single penny going out of your wallet

This is a simple method but it works every time. Don’t estimate how much you spend per month, write it down. At the end of each day, you must know exactly how much you spent and where you withdrew money from your bank account. Write it down on a piece of paper or on an Excel Spread sheet.

At the end of the month, you will have the exact amount you need to live on a day to day basis. Even if you encountered exceptional events such as a car break, illness or robbery, you still have to count it in your expenses. The problem is that the unexpected happens on an expected basis: all the time!

You should repeat this exercise over a longer period than a single month in order to see coming other expenses such as car repairs, municipal and school taxes, etc. The ideal period would be a year but you might bet tired of writing everything down. This is why we suggest you use the following tool to manage your budget: Microsoft Money or Quiken.

Prepare a budget

Your sources of income will probably easier to calculate unless you are working on commissions. If it’s the case, you will have to accumulate enough money to cover up to three months of living. For the others, one or two lines should be enough to include your income.

As your income is more limited than your expenses, it is important to make sure you don’t spend more than you earn. You will have to cut on your spending until you get to a break event point. If you can’t, you will need to get a second job in order to overcome your debts and breathe again.

Controlling your expenses is the very first step to financial freedom. But before landing to planet money, you must first pay off your debts and repair your credit bureau.

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