One of the reasons I like working with numbers is because I enjoy solving problems. Word problems, mysteries, puzzles, they all interest me. Like a good detective, I pulled these “Five Steps to Solving a Murder” from the show Unusual Suspects. It’s the same when we are looking for where all your money is going. It can be a complicated process, and the answer isn’t always the most obvious.
Document everything in the Murder (or Money) Book
Have a computer and/or file folder for all your financial records. Especially in January, take the time to read ALL your statements. Bank Statements, IRA from previous employer, credit card bills, car payment invoice, gym membership, phone, electricity and entertainment.
Record Every Step: Make a list of your monthly bills that are always the same. Next, list bills that may change each month, such as electricity and credit cards. Lastly, start tracking those bills you only pay occasionally, such as car registration, holiday gifts, birthdays, subscription renewals. Those will take a while to track as the year goes by.
Nail Down the Timeline: Total all the monthly bills to see how much you owe per month. Note the credit cards, car payment, student loans, the % interest, the minimum payment, and the date it would be paid in full.
Follow Every Lead: Read those statements carefully, are you being billed correctly? Are your payments being applied correctly? Are there any additional fees you don’t understand? Look at your credit report – are there any outstanding items you didn’t know about? Do you need help to negotiate the amount due?
Treat Everything as Evidence: Look at your year-end W-2 or 1099. How much did you make in 2016? How much was withheld in taxes? How much did you have available to spend? With the information from previous steps, can you figure where most of your money went? Do you see some holes? Were you surprised by how much you spent on groceries and eating out? Instead of trying to resolve last year, start on a better track in 2017.
Perseverance: Set some measurable goals. Negotiate some bills, follow-up to ensure the rate is reduced. Pay off a couple of small bills to get them out of the way. When do you want to increase your 401K contributions? Can you get your taxes done early, and use the refund to pay off some bills?
It is frustrating when you lose money and can’t solve the mystery of where it went. If you’re having difficulty with these steps, contact me for a Complimentary one hour Strategic Session to review your finances and figure out how we can solve your mystery.