Building a Financial Success Plan

Woman holding check from employment earnings.Financial success is all about planning. Developing that plan includes understanding how you value your money, tracking your expenses, and setting goals. The final step in building a financial success plan is to develop a spending and savings plan that identifies spending leaks and corrects them by reducing your spending.

Building financial success is a process. In these presentations, you will learn about each step needed to develop a financial success plan and the tools to keep it on track.

Financial Success Plan: Tracking Expenses Transcript

Part 1: Building a Financial Success Plan: Tracking ExpensesVideo
Idaho Assistive Technology Project (IATP)
July 2014

Slide 1:

Building a Financial Success Plan, Part 1. Building financial success is a process. In these two presentations, you will learn about each step needed to develop a financial success plan and the tools to keep it on track.

Slide 2:

In the presentation, Building a Partnership with Your Money, you learned about needs and wants. Keeping a plan on track means knowing the difference between a want and a need.

Needs help us survive, their costs can’t be avoided and they typically fall into five spending categories — food, shelter, clothing, healthcare, and transportation. On the other hand, there are many different wants. Wants make our lives more comfortable and enjoyable, they’re far more numerous than needs and they vary from person to person.

It’s easy to spend money on wants. We may forget that a want, such as buying candy, magazines, or videos on impulse at a checkout stand may prevent us from being able to pay for basic needs.

To take control of your finances you need to think back to your SMART goals and keep pressing forward. Remember, SMART stands for Specific, Measurable, Attainable, Relevant, and Time-Bound. These five factors can help you create a strong and solid goal that you can work towards. This makes it easier to pass up those “want” purchases.

Slide 3:

You’ve already learned about your money personality! Now we’re going to talk about how to build a financial success plan.

Are you going to be able to correct everything overnight and build a financial success plan just like that? It’s not that easy. Like most things, it takes practice and time. It is said that if you do something for 21 days, it will become a habit. So, as you work toward building your financial success plan, it will get easier to make good money choices.

It is important to stay positive and visualize yourself succeeding when it comes to building good money habits. It is also important to not get discouraged when you slip and make a mistake with your money! The important thing is that you noticed you made a mistake and you work to correct the habit.

In this module you will take all you have learned about your wants, needs, SMART goals, and your money personality and begin to develop your financial success plan by learning the first step: budgeting.

Slide 4:

So let’s talk about the first budgeting topic—where your money goes.

Do you know where your money goes? Do you know where you spent your money last month? What about last week?

Regardless of how you answered the questions, it is important that you know how you spend your money. Understanding how much income you have and where you spend your money every month will help you take control of your finances.

Slide 5:

A spending plan or budget lists what a person expects to spend. A list of actual expenses shows where you really spend your money. Your stress will lessen when you track your expenses and make a realistic spending plan.

You need to budget and track expenses in order to build a financial success plan. Many of us confuse tracking expenses with a spending plan or budget, however, they are two different tools. Tracking expenses is useful for anyone who wants to develop a spending plan or a budget to help control expenses.

Slide 6:

Take a moment and think about how you spent your money in the past week. Did you spend most of it on wants or needs? Do you know where you spent your money?

If you paid a utility bill, good job! You spent your money on a need. If you spent your money at the movies, you spent your money on a want. Do you have enough money to pay your utility bill? If not, a budget will help you make good spending choices in the future.

Slide 7:

The second topic will talk about five different methods to track expenses. In the following slide, we will talk about ways to track your expenses.

Slide 8:

There are several ways to keep track of your spending. Here are the five most popular ways to track expenses. The goal is to choose one, or a combination, and keep a record of where every penny goes for a set period of time. Start by tracking your expenses for seven days. Then track for a month to get a more accurate picture of where you spend your money. The five different tracking methods are: receipt, envelope, calendar or notebook, checkbook, and computer.

Let’s look closely at each one.

Slide 9: (Interactive)

The receipt method is an easy and convenient way to track spending, but it means making sure to get a receipt every time you pay for a product or service. Label all receipts with key words such as food, transportation, or clothing. Store receipts in a can, storage box, receipt file, or large envelope that is divided into spending categories. Bills for utilities, insurance, etc. should also be filed in the storage container after they are paid. If you use credit or debit cards be sure to file those receipts under the appropriate spending category. If you don’t get a receipt, make one. Label it and file it in the proper file. Sort the receipts at the end of each week and write down the amounts spent in each category.

A second method that works well when paying for things with cash is to use an envelope. It requires little paperwork. Label an envelope for each expense category, such as rent, utilities, food, etc. Then write on the envelope the cost of each item that will come out of that envelope and the date the item will be purchased, or the bill will be paid. When you cash your paycheck or receive other income, divide the cash into the envelopes for each expense category. Inside each labeled envelope put the amount of money you plan to spend in that category each month. You don’t have to record how much was spent, just replace the cash with receipts. Pay bills right away so you won’t be tempted to spend the money for something else. Keep envelopes in a safe place, preferably in a locked box. Try not to shift money from one envelope to another. If there is money left in an envelope at the end of the month, you’ll know you’ve done well. Save leftover funds for future emergencies in a savings account or envelope labeled savings.

A third method is to use a calendar or notebook. If you decide to use a calendar you will write your income, for example payday, on the date it is received. Note when bills and expenses are due and as they are paid, mark that bill off. If you choose to use a notebook, you can list your expenses and income for the month. You will put the date when income is expected, and list the bills you will pay at that time. The notebook can also be used as a place to store bills so they are easy to find. The calendar or notebook also provides a spending record at tax time.

The fourth method is to use a checkbook or debit card. This method works best if you use checks or debit cards to pay all bills and purchases. In this system expenses are tracked by using a checkbook register. By recording each check or debit card transaction in the register you will have an accurate record of what was spent. The checkbook register should include the date, check number, name of the person or business, and the amount of the purchase. For each entry, make a note of the spending category. At the end of each month you can track what was spent by totaling the expenses from each category and comparing them to the amounts in your spending plan.

A computer is the last method we will discuss and is an easy way to identify your spending in different categories. It also supplies you with accurate records for tax time. You can buy personal finance software or develop your own categories on a spreadsheet. Using a computer to manage finances is very easy. You can quickly update your spending information. If you enter transactions often you will always be aware of how you are spending your money.

Slide 10:

After tracking your expenses for a month you will be able to categorize your purchases, set target amounts for each month, separate your needs from your wants, communicate how to reduce expenses and reach your goals, and identify times when you made a mistake in how you spent your money.

Slide 11:

We have discussed money habits and how they can positively or negatively affect the way you spend your money. We also learned about five ways to track spending: the receipt method, the envelope method, the calendar or notebook method, the checkbook or debit card method, and the computer method.

By identifying where your money goes, you will learn where to make spending changes. Tracking expenses is the first step to controlling spending.

Slide 12:

Take a moment and think about how you keep track of your expenses. Do you keep track of receipts in one place? Do you write your income and expenses down? OR, do you just hope that you’ll have enough money?

Tracking your expenses is a good way to stay on budget. If you track your expenses, you will always know how and where you spend your money and you will be able to make adjustments to your spending habits as you go.

Slide 13:

Thank you for taking the time to participate in this module. We hope that you found it relevant and useful to your life!