STEPS TOWARD GETTING THE STUFF YOU REALLY WANT

Many people don’t have a good grasp on how much money they spend or what they spend it on. Cash slips through their fingers with little to show for it. But the first step in becoming financially independent is to spend your money wisely on the things that are important to you.

This activity walks you through the process of setting financial goals and figuring out how to reach them.

1 Review the short-term goals you listed. Calculate how much money you need to reach them. How much do you need to save in total in order to achieve your goal? How much would you have to save weekly if you save for three months?

2 Track your cash flow. You’re smart. By now you know that setting goals isn’t enough—you need a road map for getting to your end point (a budget). And the first step in figuring out a realistic budget is to figure out how much money you have coming in either from a part-time job, your allowance or from doing chores and other small jobs. By adding up all those payments, you can calculate your weekly cash flow.

3 Track your expenditures. Chances are pretty good that you’re not saving all of the money you’ve earned. Calculate how much money you’re actually spending by keeping receipts or using your cell phone to track everything you buy for a few weeks. Add up all the receipts and divide by the number of weeks to come up with your weekly expenditures.

4 Separate those expenditures into ‘wants’ vs. ‘needs’ and tally them up. How much of your cash do you spend on the necessities of life per week (things like food, housing, transportation)? That total represents money spent on needs. How much do you spend on the things you want, but don’t need?

5 Think about whether the way you spend money reflects your goals. If not, what expenses could you cut back on or eliminate to help you reach those goals? That amount represents your potential savings. If you saved that amount every week, how much money would you have in a month’s time? Three months? A year? Could you reach one or more of your goals?