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Have you ever
counted the change in your pockets and wondered why you didn't
have more money? Maybe you thought you had enough money to buy
an ice cream cone. Or you remembered you needed to save a
dollar for a special lunchtime treat. Instead the money you
thought you had is gone. You ask yourself a question familiar
to many other kids and adults, "where did my money go?"
Managing your money - a first
step
Understanding where your money goes is one of the first steps
in learning how to manage your money. Try writing down your
income (or earnings) and expenses for a week. You can use a
small notebook and write each day's income and expenses on a
separate page. You may want to divide each page in half by
drawing a line. It doesn't matter if you divide the page
horizontally or vertically. Write "Income" on one side and
"Expenses" on the other. Income is money that you either earn
from a job or receive as a gift. Under "Income," write down
the money you received that day, like an allowance or a check
from your grandparents. Other types of income include money
you earn from a part-time job, like walking a neighbor's dog
or babysitting. Under "Expenses," list the things you buy each
day. If you pay for lunch, you should write it here. Buy a
comic book or a candy bar? Write it down. You should also
include under "expenses" any money you give to a church or
charity. At the end of the week, add up all the money in the
"Income" sections. Then add up all your expenses for that
week. Now subtract your expenses from your total income. At
the end of one week, did you spend or save most of your money?
I spent a little or I spent a
lot! What does it mean?
The purpose of writing down your income and expenses is to
help you understand where your money goes, so you can make
smarter spending decisions. Looking back at how you spent your
money, you may be surprised to find out how much money you're
spending on candy, pens or other small items. For example,
let's say that you want to save for something special, like a
CD player, a movie on DVD or a bike, but week after week you
never seem to get any closer to your goal. By knowing how you
are spending your money, you may find that you are willing to
spend less on small items, so that you can put that money
toward the larger-priced item you're saving for. It may help
you get the item sooner.
I've kept a record for a week.
Is that enough?
Just keeping track of your expenses for one week may not be
enough to give you a picture of how you are spending your
money. For example, you might spend more money on school
supplies in the beginning of your school year than at the end
of the year. There may be certain times during the year when
you spend more on baseball cards or ice cream cones. Try
keeping a record of your expenses for a different week every
month. For example, you may write down your income and
expenses the first week of January, then again the second week
of February and the third week of March. Keeping a record at
different times during the year might help you discover any
patterns associated with your spending. Or it may help you
identify those times when you need to plan for extra expenses,
like birthday presents.
The next step
After you have kept a record of your money for a few weeks,
next try creating a budget and following it. Think of a budget
as a plan that both lists the money you expect to earn and
details how you might spend it. To learn more about creating a
budget, read our article, "Budgeting:
Your Tool to Balance Saving and Spending." (For an example
of a budget sheet, click
here. When you create your own budget, use categories that
make sense to you.) Once you have a budget, follow it for a
month. Keep track of your income and expenses during the
month. Then, at the end of the month, compare the actual
amounts you spent with the budgeted amounts. Maybe you
followed your budget exactly. Maybe you underestimated your
expenses or had unexpected expenses. You may discover at the
end of the month that you spent less money on certain items
than you thought you would. The next step? Revise your budget
and follow it for another month. Budgeting is not about how
much or how little you spend. Budgeting is about understanding
where you spend your money. And, when you have a savings goal,
budgeting is about making decisions that will help you reach
your savings goal. Learning to manage your money, through
budgeting and keeping records, will help you make decisions
about your money that are right for you. |