Why do you want to more money? Why do you want to be debt free?
You spent some time tracking your spending, then going over the data you compiled to get more insight into what it is you're doing with your money.
"Ok," you're thinking,"now you're going to tell me to make a budget."
Nice thinking, but it's premature.
What is a budget?
Strictly speaking, a budget is "the amount of money that is available for, required for, or assigned to a particular purpose."
With that definition in mind, I'd say a budget is how you plan to use the money you have earned and/or that is available to you to live your life. Without a plan, you will either wind up in debt or spend that money on things that really don't make your life easier or more enjoyable.
That's why I don't think the next thing you need to do is a budget. The next you need to do is figure out what your priorities are.
Your Spending Record Indicates Your Financial Priorities
What do you want out of life in general and day-to-day? What do you spend your money on?
Experiences matter to me. I like to go to nice restaurants. I like to try cooking gourmet meals or desserts. I like to visit my family and close friends often. I like to take big trips whenever I can. I like going to the movies. I also like the comforts of home -- TV, movies, stocked fridge, cushy couch, comfy bed, big thirsty bath towels. I also like trying new things: canoeing, rafting, surfing, trampoline, pole dancing, something novel, something fun.
I also like to give to worthy causes, which I still consider an experience -- I'm just granting a good experience to someone else.
If you look at my monthly reports, you'll see I am always spending a lot on food, clothing and travel. I also "tithe," so I give money away.
I try to spend most of my money on the things that matter to me and AS LITTLE AS POSSIBLE on the things I don't care about!
Being Debt Free Is Your Top Priority
If you're in debt, then getting out of debt should be your singular priority. It's going to be hard to spend your money on the things that matter to you with debt weighing you down and costing you money without providing you with ANY benefits whatsoever.
It may turn out that what you spent your money on is NOT what you prioritize. Then it's good that you went through the spending record exercise, because now you KNOW that and can now do something about it.
Discover What Matters: Your Financial Mission Statement
So what should you do now?
Write down what matters to you. Come back to it in a day or so and read it aloud. You're trying to drill down to the true essence of what matters to you. Once you get that, write it down again and formulate your financial mission statement:
I want to be out of debt so that I can______________.
I want to be rich so that I can _______________.
Fill in the blank.
Mine is: I want to be debt-free and build wealth so that I can live a life full of worthwhile experiences and know that I helped others do the same.
My saving, investing and spending should reflect what matters to me.
Don't try to sound all noble in your mission statement. Be HONEST!
Maybe your statement is:
I want to be rich so that wherever I go, I am the baddest dressed chick on the scene, ALWAYS!
Fine! It doesn't mean that paying bills or taking care of the kids are not important. It just means that once you take care of your responsibilities, it's all about your wardrobe. Whatever does it for you baby.
Think about your priorities. Then we'll put your money to work for you.
Debt Hater is a personal finance blogger who paid off nearly $16,000 in credit card debt (not including a car loan!) in four years, just like she planned. You can visit her blog at www.debthatersblog.com.