Here’s a great question for you. When you approach the end of the month and you have already reached the end of your money, ask, “where did it go?” Answering that question accurately is the key to making progress against the dilemma of having to decide which creditors get the last of the money and which ones have to wait until next month.

In a corporate world, it is an issue of “cash flow.” There are many businesses that have run into the same or a somewhat similar problem. On paper, the businesses have assets greater than their liabilities, but cash shortages make management look as if they don’t know how to run their businesses. Instead of calling it a cash flow problem, in a personal finance setting, individuals tend to call it “being broke.”

Rather than “winging it,” try running your household more like a business than a free-for-all with your money. The best solution for the problem is to conduct a cash flow analysis and maintain a monthly cash flow statement. Run through the past couple months and list every place where money went or was spent, every last dime of it. Right beside it, show the amount(s) and dates when the money was spent or paid. As you create this cash flow statement, categorize the expenses into accounts such as coffee, lunch, breakfast, dinner, transportation, housing, etc. This will allow you to sort the expenses into meaningful accounts or categories. This more specific and detailed record allows you to do a cash flow analysis to help you to make decisions about managing your spending better.

From that analysis, you can begin your budget and your debt pay-down plan. Do as Dave Ramsey of Financial Peace University does and start a debt snowball payoff plan. As your debts begin to disappear, celebrate and keep working to get entirely out of debt and never go back to running your finances the old way again.

Once the cash flow analysis is done and the budget set, then follow the budget for a few months. Continue to watch and record every dime spent, listing the date, the item purchased and the amount. Doubtless you will have to adjust the budget as you notice a small amount of money disappearing here and there. Perhaps it is a Starbucks once or twice or more a week that is paid for with cash. That adds up fast. Or perhaps it is some crackers or a candy bar from a vending machine. Whatever the expense, write it down. If you don’t have any paper handy, send yourself a text or an email so you don’t forget.

You may want to record whether you paid by cash, by credit card, or by debit card. This might help you see spending patterns such as the fact that you are probably like most people; you likely spend a lot more when using credit or debit cards rather than cash. See Do It the Easy Way and Pay.

After you finally have your budget accurately tracking and predicting your monthly income, expenses and net, then live on it for the next quarter – three full months – If necessary, continue to adjust it if a few unusual or irregular expenses come up.

At the end of that first quarter, sit down and take a look at each expense account or category. I wrote “sit down” for a good reason – you will very likely be surprised at how large one or more expense accounts or categories are. A little bit here or there, one Starbucks coffee a week doesn’t seem like a lot, say $5 per week. That’s about the same cost as two or three soft drinks a week. But over three months that is close to 13 weeks, or $65 dollars. Was it worth it? $260 a year sounds like a lot more than $5 a week even though it is the exact same amount.

To make this budgeting process completely accurate and fully useful, consider that your budget is a family issue, not an individual one. Both spouses must be engaged, otherwise the missing money remains invisible. All expenses, whether large or small, must be recorded during the cash flow analysis and budget development phase.

Now, after this five to six-month process, you know the answer to the question, “Where did the money go?” Now the challenge is for you to make a personal assessment about those expenses and decide if they are worth the overall impact on your budget. Again, $5 a week may not sound like much, but $260 a year sounds like a meaningful sum to just throw away. It sounds even more impressive when you take a longer view and realize that in the next ten years you will give $2,600 to Starbucks or that convenience store. Over a 40-year work life, that is over $10,000.

Personally, I’d rather have the money than the calories stored around my waist.

If you would like more information about Financial Peace University or any of the topics discussed above, give us a call at (813) 264-8713, The Idlewild Foundation.

About the Author

John Campbell has retired from a 40-year legal practice as a trial attorney in Tampa. He has served in multiple volunteer roles at Idlewild Baptist Church in Lutz, Florida, where he met Jesus. He began serving as the Executive Director of the Idlewild Foundation in 2016. He has been married to the love of his life, Mona Puckett Campbell, since 1972.