Track every penny you spend, it doesn’t matter how you track your spending since the most important thing is to do it. You can use a cash notebook, or a digital notebook, you can use an on-line tool like Wesabe, or you can use a piece of software like Quicken or Microsoft Money, or if you don’t like complicated things, just use the pen and the old paper!
Whichever method you choose stick with it and never change it. Make it a habit, a permanent habit. Don’t allow one single transaction to be forgotten! Record your transactions as soon as possible. Most of all, don’t judge yourself. Tracking your spending is an exercise in data collection; it’s not the appropriate time to change your habits. This is not judgement, it’s experiment!
Develop a budget, after you’ve tracked your spending for a few weeks, months or maybe even years, use the data you’ve collected to develop a budget and to see where you can save some money.
Many people fail to budget for a variety of reasons, it’s boring, we don’t think we need it, we don’t know how, we don’t like it, it’s complicated, and more reasons. But this simple act provides a roadmap for your money and if you are good, you can see where each single penny goes! There are a variety of budgeting methods you can choose. Use a computer software if you know how to use a computer. A computer never misses, never fails and doesn’t lie! It’s doesn’t fake numbers and the numbers of the computer are always exact! Microsoft money is the best solution for money software but you can try it first, download a free trial from the official website. Or you can use an online tool for free. However I don’t trust these tools specially if they are free. Use excel if you want for simple money managament if you don’t have too much time to spend.
Start a savings account, no matter how much money you make, if you spend it all, you will be poor, all the time. Some people make millions of dollars every month but they spend it all too! So they end poor in the end… You need to save a good percentage of what you earn, all the time! And the best way is to put some money aside automatically!
Spend less than you earn, this is the fundamental money skill and unless you are a master at it you will end poor. It’s common sense, yet many people never learn do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending or develop a budget, but those steps aren’t completely necessary. Even if you do nothing else in this list, spending less than you earn can put you ahead of your peers. If you don’t think you can resist the temptation, just open an account you can’t withdraw for several years!