Family Finances – Analyze your current financial situation

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Money can’t buy love or happiness, but you sure need lots of it when you have a family. Unfortunately, money is usually the number one cause of marital arguments and divorces. Since we love our honey, we better get the financial situation under control.

We work hard every day to afford the things we need and want, so we need to make sure that money is well spent and saved. That’s why every family needs to approach their finances strategically.

I like to spend money. If you know me well, then you know that I don’t spend much on myself, but that I love buying things to make of our house a home. Since I like to spend money, I make sure to work hard and to manage our finances to the best of my ability. Last year I made sure our family saved over $50,000! We are a family of 6 and we had never been able to save that much, so to us it is a great achievement! That’s why I would like to share with you how I did it and how you can do it, too!

Before I get started, I want to remind you that I am not a financial advisor and that you should never take finance advise from anyone! Really! Read my blog post, but do your own research, form your own opinions, and structure your finances in a way that would work for the unique needs of your family.

I will probably need to write many blog posts to cover all these aspects related to family finances:

  1. Analyze your current situation
  2. Establish goals
  3. Make a plan to achieve these goals
  4. Financial tools
  5. Get to work
  6. Analyse
  7. Report
  8. Optimize

Today, let’s talk about the first item in the list: Analyze your current financial situation. I did this several years ago when we were spending much more than what we were making and had a lot of credit card debt. I created a document that helped me organize our finances and since then I update every quarter.

The steps to better understand the current situation of your family finances are below. You can follow along by printing our Family Finances Planner. It contains several worksheets I put together to guide you through this process this process. You can download it here.

  1. Make a list of all of your accounts, credit cards and loans:

    Grab pen and paper and make a list of all of your accounts. Head over to their websites and make sure you have logins for all of them.

  2. Make a list of all the bills and other recurrent expenses

    In the same piece of paper, try to list all of the bills and recurrent expenses that come to mind. Think of every month of the year, every daily activity, everything you own and try to gather as much as possible.

  3. Make a list of other expenses that are not as recurrent

    There are some expenses that don’t happen every week or every month, but that we have to budget for, so they don’t catch us off guard. Think of any annual fees, or quarterly payments. I call these payments that are known and recurrent, but on a different schedule ‘Extraordinary Expenses’.

  4. Create categories

    Start to find the patterns between all of your expenses, so we can create categories that make sense to you and your family.

  5. Download statements from all your accounts and credit cards and categorize all expenses for at least 3 months

    Here comes the fun part. Go to the websites of all of your accounts and credit cards and download the latest 3 statements into csv files. Create a column for categories and go row by row categorizing those expenses. You will find some expenses and bills you had not thought of, and some that you will definitely want to cancel or reduce.

    The first time I did this years ago, I categorized expenses for a WHOLE YEAR. The reason I did this is because I had never work on our finances before and literally had no idea of what our expenses were (yeah, that’s how bad our situation was like a few years ago!) and I wanted to get a good understanding of patterns and annual charges/fees that I couldn’t see if I had only done it for 3 months.

  6. Group all expenses into categories

    Now that you have all of your categories and categorized all of your expenses, it’s time to sort and filter. In your spreadsheet, select all columns and rows and select Sort & Filter from the menu. Then go to the category column and sort alphabetically, this will order all your expenses by category.

    Now it’s time to add them all up. To do this, you can use a calculator or you can use the formula =SUM(A1:A12) where A1 is the first cell with that category and A12 is the last cell with that category. Do this for all categories until you have all your totals.

    The amounts can be mind blowing! Do this for each monthly statement csv file you downloaded, so you have a better understanding of your spending patterns.

  7. Highlight the expenses and categories that you think you could/should reduce

    This is another fun part. I want you to be ruthless, almost decide that you will sell everything you own and buy a #skoolie. We can take it down a notch later, but for now, it is important to highlight everything that is a splurge, random, unnecessary expense.

    Now, add them all up. This amount will also blow your mind! How much money do you think you are spending unnecessarily? How much money are you wasting? How much of your hard work is going down the drain? It’s an ouchy moment! I know.

    Now add all of those expenses up by category and subtract them from the results we got above on the 6th step. The results should be closer to what your real monthly budgets should look like.

  8. Make a list of all recurring income

    This step should be much easier. Your income should also show in your bank statements. Think of paychecks, social security benefits, etc.

  9. Make a list of extraordinary income

    We need to take into consideration our tax refund, our bonuses, our dividend payments, etc.

  10. Subtract expenses from your income

    An easy step to finalize the analysis of your current financial situation. To us, this step was eye opening. We knew we were spending more than what we made, but didn’t even know by how much. It was time to get to work to get our finances into shape.

    The next step was to set up SMART goals and I wrote another article about that, so you can follow along. Please let me know if you have any questions and I am more than happy to help!

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    Family Finances – Analyze your current financial situation

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