3. Monthly Expense Chart

How to get out of debt, step 3:

Create a monthly expense chart with amounts spent

Previous: 2. Categorize monthly expenses and get your finances organized.

3. Create a monthly expense chart with amounts.

Ingredients: your list from the previous step, bank, credit card and other statements, computer software expense tracking utility, ledger entries.

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This step is simply accounting. Using your ledger, a piece of paper or your software expense tracking utility, create a monthly expense chart by writing down exactly what you've spent in each specific category. Then add up all the amounts in each tier to see how much each tier cost you. When you have done all this, calculate all of the figures to see what your total expenses were.

Here are some categories of household expenses to get your expense chart going. A simple spreadsheet can make a great monthly expense chart, but Quicken helps you with a more comprehensive list:

• Auto

• Clothing

• Dining Out

• Electric

• Furnishings

• Gas/Oil

• Groceries

• Home repair

• Miscellaneous

• Recreation

• Taxes

• Telephone

• Travel

• TV/Cable/Internet

• Water

Now, you can compare this to your income. You will immediately see if there is a deficit, surplus, and how much that is. After expenses, how much money are you earning? How much is available for paying off debts? How much is available for investing in long-term accounts such as retirement accounts? If you are not earning as much as you are spending, how much is the shortfall? Since you have categorized all of your expenses in the three-tier system, you can also see immediately where you can cut down your expenses.

The most comprehensive and useful way to keep your monthly expense charts and many other financial reports is to use a dedicated software.

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That, in a nutshell, is what we are about to do. We are going to minimize expenses, maximize income, restructure our debts in a favorable fashion, and change the way we do business so that we will be taking control of our financial destiny. Our monthly expense chart will be the main tool in that task.