How’s Your Relationship with Money

Like all relationships, this one takes work and focus. If you don’t know how much debt you have or how much you make, or even how much you spend each month, then I would suggest that your relationship with money is not working.

So, what’s the answer? Why not start at the beginning. First, figure our how much money you have coming in each month. Then, figure out your monthly expenses. When I first had to deal with my relationship with money I didn’t know how much I was spending each month. I never balanced my check book and barely looked at the bank statement. For the first month I wrote down everything I was spending my money on and then looked at where I was wasting money and what my obligations were. Starting from there I opened and excel spreadsheet and made a simple balance sheet just like the one that comes with your check book: Date, Item, Income, Expense, Balance.

If you don’t know how to set up a budget, a good place to start is by figuring out your income, subtract your expenses and then what ever is left over can be put towards debt or added to your savings. In my budget I’ve allocated 10% of each pay check to long term savings. This would be your RRSP (Canada) or 401K (USA) for example.

Short Term Savings, also 10% of income, is for those items that you want to purchase in the next 1 to 5 years. A trip perhaps, or a new car, or even renovations to the house; you decide. At least 60% should go to expenses such as rent/mortgage, food, utilities, clothing, etc.

All work and no play is not good for anyone, so take some of your hard earned money and enjoy some entertainment. This could be dinner with friends or renting a moving. Allocate 15% to entertainment and the remaining 5% towards charities. In this economic climate you will not only feel better for helping others who are less fortunate, but you will be making a difference.