Financial success doesn’t happen overnight. The road to financial freedom begins with mapping out a strategy for where you want to be.  It begins with knowing where your money is going every month (budgeting) as well as knowing what you own and what you owe, your assets and liabilities.  There are many apps that can help you track your spending.  Some of them link to your bank accounts, bills and credit cards.  You can find reviews of some of them, including Mint, You Need a Budget, Personal Capital, Mvelopes and Spendee in the January 2017 edition of Kiplinger’s Personal Finance magazine.  The benefit is that they track income and spending for you without you having to put a lot of effort. Nonetheless, sitting down and doing the exercise on your own is quite eye opening and will give you great satisfaction to know the areas of spending that need special attention. Here’s a link to our Excel-based budget tracker.  You can also find a PDF version below. It’s easy to use and gives you a summary of your financial situation into the following six categories:

  1. Housing
  2. Household/Personal
  3. Loan Payments/Savings
  4. Transportation
  5. Personal Insurance
  6. Discretionary

We call the Discretionary Category “The Red Zone” because this one can meaningfully impact your ability to save and/or get out of debt.  These are the “little things” we don’t think about that mess up your budget, like that afternoon latte to get you through the rest of the work day.  They may be little when taken individually, but add up in a month’s time.

Besides a budget tracker, keeping a list of what you own (Assets) and what you owe (Liabilities) is another exercise to know where you stand to take control of your financial life.  The difference between your assets (what you own) and your liabilities (what you owe) is called Net Worth.   The Budget Tracker and The Assets and Liabilities Tool go hand in hand but they serve different purposes.  To learn more about how these tools complement each other, click here.