by Ray Cook

Created on: March 19, 2008

Personal finance has been part of my lifestyle ever since I received my first pay check.
What does that actually mean?

You have to be very disciplined in a number of ways. This may appear to many people, especially young people, to be somewhat onerous and "uncool", maybe even a little "nerdy". If you start young and get into good habits then you won't even notice that you are doing it after a while. The feeling of knowing that you are in control of your finances will save you a lot of stress in life.

PERSONAL FINANCE RECORDING

Keeping records of everything is the first rule of personal finance. Before the days of home computers I used to keep a small ledger and write in everything I spent or received. When I bought my first computer, the first application I used it for was personal finance.

This is how I record stuff. Create a spreadsheet which records all your earnings (and your spouse's or partner's). On this same spreadsheet record all your regular expenses such as mortgage and utility bills. Then break down your other expenses into categories such as food, car, vacations and so on. You should aim to have 20 to 30 categories. The spreadsheet should have some basic computation such as totals for income and expenditure and for your net gain or loss. Your spreadsheet should cover a financial year which you complete as you go along.

The reason for recording expenses against categories is that you will build up a clear historic record which will allow you to budget and predict future spending.

I would strongly recommend that you invest in a personal finance software package such as Microsoft Money. There are open source alternatives such as Grisbi which are worth looking at.
Whatever package you choose it is important to set up your bank, savings and credit card accounts and record an initial balance. Next you should actually find all the cash you have on you and around the house and set up a cash account and record your cash total.

Now you have to be disciplined, and it may take you awhile to adjust. It's a bit like changing your diet, difficult at first and you may fall into temptation.

Keep every receipt during the month
Record every cash transaction; you may want to keep a little notebook to do this
Record the payee of every check you write in your checkbook
Enter every transaction against one of the categories you set up in your accounting package

These are the simple rules of recording which will set you on the road to making your lifestyle change.

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