Personal Financial Management Using Free Tools - Part I

Have the fiscal gurus scared you out of managing your money? Are it because they desire you to pay them to pull off your money for you? You can pull off your ain finances. Just follow these 3 stairway in this 3-part series:

1. Where are you now? Path your disbursement -- everything for a year. Put it all in a summary; I'll demo you how. If you are like most people you are living payroll check to payroll check and have got no thought where your money is going.

2. Where make you desire to be? How much make you necessitate to have got put aside in 5, 10, 25 years, or when you retire? You necessitate to see life expectancy, inflation, charge per unit of return, and annual life costs during retirement. Just follow my hypothetical illustration using free software.

3. How will you acquire there? How much make you necessitate to salvage each twelvemonth in order to collect the sum necessary? See the figure of working old age left until retirement, inflation, and your expected charge per unit of return.

You won't necessitate to purchase any personal finance software system or particular Excel solutions. I utilize a liberate application called OpenOffice Calc; it's a small slower than Excel, but it can make just about everything that Excel can -- and did I advert that it's free? Just hunt "OpenOffice" and acquire your free download.

Let's acquire started. How are you at record-keeping? If you have got your checkbook, depository financial institution statements, and recognition card statements available, you can travel through them calendar calendar month by month for the past twelvemonth and fill up in the tabular array below. If, like most people, you have got not held on to your records then just fill up in the tabular array for each calendar month going forward.

This exercising is very of import because:

It will assist you reply the critical first question: "Where are you now?"

You will acquire a bird's oculus position of your finances over an drawn-out period.

You will be able to compare yourself with the average.

You will be able to descry where your money is leaking.

Create a tabular array with the following:

Expense JAN February March ... December TOTAL TOTAL% AVG%

Gross income (Average 100%)

Income taxes (Average 22%)

Shelter (Average 19%)

Transportation (Average 13%)

Food (Average 11%)

Recreation (Average 6%)

Household (Average 8%)

Clothing (Average 4%)

Gifts (Average 3%

Other (Average 14%)

This is a simple 10 line spreadsheet to acquire you started. You may desire to spread out on it as you travel and interruption the wide classes down. E.g. "Shelter" can be broken down into: Rent/Mortgage, Utilities, Place taxes, Repair/Maintenance, etc. The last class "Other" rates particular attention. Since this class includes, on average, 14% of our expenses, you will definitely desire to interrupt this down into line points which do sense to you and supply utile information to you. Some possibilities: health, personal, tobacco, alcohol, bingo tickets, education, books/magazines, etc. Remember, your end is to happen out where your money is going, summarize, and compare your state of affairs with the average.

Are you living payroll check to payroll check (within your means)?

Are you disbursement more than than you gain (beyond your means)?

Are you earning more than you pass (below your means)?

The 2nd article in this series will assist you reply the 2nd critical question: "Where make you desire to be?" Bash you really necessitate a million vaulting horses to retire in comfort?