Steve Pavlina just posted the latest numbers for his personal development blog, and I think under-monetized is an understatement. He gets 1.3 million unique IP’s a month and makes 12 thousand dollars split between Adsense, Text-Link Ads and donations. Do the math and that averages to less than 1 cent per user, not exactly numbers to die for. I honestly think he deserves more than that for all the thoughtful and helpful content he has made over the years - 250 posts a year is a lot, considering how lengthy and content-rich his articles are.

On the other hand, making twelve thousand a month, working from home and doing things that fulfill his life’s mission may be the actual measure for success in this case.

He’s also officially announced that he’ll be moving the personal development business offline during the coming months. Move over Tony Robbins, there’s a new guru in town!

Technorati Tags: Steve Pavlina, blogging

I’ve been terrible with personal finance my whole life. It’s just something I never bothered with, always dismissing that things will take care of themselves. I never got into debt I can’t handle but my savings was pitiful, I ended up spending a lot on impulse, and I never can remember where my money flew away to.

I’ve finally gotten out of the budget-phobia for a short while now and my finances have started to look better. This a short guide for those in the same boat as I was, “knowing” they need to get this area handled or risk spending the rest of their financial life like a twelve-year old in a comic-book store with a hundred dollars in their pocket.

Note that this is how I worked my budget and I’m not an expert, so use it as a guide to help you. Along the way, you’ll figure out ways to work that are more appropriate for your situation so be flexible enough to accomodate your own instincts.

1. First thing to do is to track your actual spending.

This is one of the hardest part. As someone who never paid much attention to budgeting, conciously watching where you piss money away is very painful. I cringed in horror every night the first week I did this.

To accomplish this, the simplest way is to just open a spreadsheet. Put days of the week on the leftmost column and areas of expenses on the top. I suggest doing it this way, instead of investing on a budget software immediately. This is very simple and the only goal is to track your spending.

Every night before bed, fill it up. Monday - 10 dollars on eating out, 120 dollars on groceries, 5 dollars on candies, etc. Tuesday, do the same thing. Do a running total for each day on the rightmost column. Once you see the totals adding up, that’s when you usually cringe, “I spend this much in one day?!?!?!”

Do this for about two to four weeks. Fight through the urge to give up. This is a very anxiety-inducing procedure. Just remind yourself that the goal is only to see where the money is going. Try not to judge yourself.

2. Study the spreadsheet.

Take down the patterns. Look for the following:

• Which big expenses are fixed and will occur on a regular basis (utilities, mortgage, tuitions, kids’ allowance, gym memberships, savings, etc.)?
• How much do you average spending on a normal day?
• What area do you spend the most money in?
• What expenses would you consider wasteful?
• What expenses do you consider a smart use of your money?
• How much money goes into entertainment activities (movies, sports, cable, DSL, etc.)?
• How much did you spend in total?

3. Take the total amount you spent and compare it with your income during the same period.

Were your expenses greater than your income?

If it is, you’ll need to cut out some things in the last period’s expenses from your projected expenses in the next budget period. If it’s not, you may decide to do away with some other expenses as well. Possible things you can consciously cut out or at least spend less on are:

• Entertainment activities
• Dining out
• Club Memberships
• Gas/Transportation (take cheaper public transportation or carpool)
• Vices (cigarettes, alcohol, soda)
• Other wasteful expenses

Whichever you decide to be dispensable, work it out. It’s impossible to sustain a budget when your expenses are greater than your income.

4. Start your new budget

Now you have your total expenses less the things you can afford not to spend on for the coming period. Let’s call it the Total Budget Amount.

Start a new spreadsheet with the same layout as before. This time, add one column for the Daily Budget Amount.

You can start your new budget by removing the fixed expenses from that amount. Make sure to write it down somewhere in your new spreadsheet to have one sheet where you can see all the activity.

The Total Budget Amount will be the base for your daily spending. Divide this with the number of days during the coming period. Then, compare this amount with the average daily expense during the last period. Is it smaller than the last period? Is it smaller than the average? If it is, use that to populate the Daily Budget Amount column. Otherwise, use the daily average from last period’s expenses.

Break down the Daily Budget Amount into the different daily expense columns. They WILL NOT be the same for each day so allot wisely. Use the previous period’s expense spreadsheet for reference. For example, you get a full tank every Monday and Thursday so allot the money for gas on those days or you take the kids to the movies every Sunday so allot the expense for that on Sundays. Fill in the daily expense columns first and don’t worry about balancing it with the Daily Budget Amount in the meantime.

After filling the columns, compare the total on the rightmost column with the Daily Budget Amount. Mark off all rows where the Total Daily Expenses is greater than the Daily Budget Amount (UNDERBUDGET). Similarly, mark off all rows where the opposite is true with a different color (OVERBUDGET).

Balance each OVERBUDGET row by subtracting the difference from the Daily Budget Amount. Once you have all the extra money subtracted, start adding them to the UNDERBUDGET items.

At this point, two things can happen. Either your alloted money will be short for all the expenses you have planned for or you will have some extra unallocated amount.

If you’re over, go through the daily expenses to see where you can chop off the needed amount to strike a balance. Check for the weekend and entertainment expenses first. You’ll usually find the easily disposable expenses there.

If you’re under, either spread it across the period, add it to your projected savings or use it to plan an extra recreational activity over one or several days.

5. Apply the budget.

Now, you have an actual budget. It’s not the best budget you have at your disposal, but consider this a trial period while you’re learning to get a handle on your expenses.

Try to be conscious of your budget throughout the day. It will help to look at your daily targets every morning or even write them down to carry with you.

Every night, replace the allocated expenses for the day with your actual expenses. This is another painful process that will bring you some anxiety, especially in the first few months.

6. Be flexible.

Things can happen that will mess up your daily allocations. Learn to allow that and move on. Treat it as a daily exercise. Every problem allows you to adjust and learn jut a little bit more about your finances. It will help to adjust the allocations on a daily basis, based on how you do the day before, just to see how well you can stretch money.

Personally, it took me around 4 months before getting comfortable with the new habit and it continues to be a learning process.

7. Recommended tools.

I recommed you stick to your simple homegrown spreadsheet the first few months. Using a predesigned spreadsheets or applications will just confuse you with stuff that is not relevant to you when you when you’re starting out.

Right now, my tool of choice is Pearbudget, a free Excel-based spreadsheet. I changed a few things to accomodate my own needs but it is fully-functional and does everything I need.

There are tons of personal finance blogs as well that can help you on your journey. One of the most useful for beginners is Get Rich Slowly, whose author is also on the learning path to getting his finances in check.

I hate worrying about money. It’s very crippling. For one, there is little you can do that will immediately solve financial problems. Secondly, it brings up all sorts of insecurities and further concerns.

While I have some amount tucked away for emergency, I also have half my credit card filled. I also blew a good chunk of it in a failed business venture last year. I currently have no permanent sources of income other than my regular job. Consulting work comes few and far between these days and my present technical expertise just isn’t in high demand anymore. I run a few websites that are making a little money from Google and affiliate links, albeit too small to make even a nudge in my finances.

I grew up with many limiting beliefs about money. For one, I believed it really is the root of all evil. I detested rich people. I hated them for having so much when so many had so little. I didn’t like displays of wealth. I scoffed at wearing expensive things. When I first started enjoying money after I got my first job, I still clung to some of those old beliefs. I think, in some ways even up to now, some of them still influence me. While I am 100%-free of the whole “being wealthy is evil” idea, I still experience many anxieties about money.

I’ve made a deal with myself recently not to think about money in certain ways because every time I do, I just feel confused, depressed, frustrated and insecure. I’ve chosen not to think of money in terms of:

• How I fare compared to more successful peers
• Old financial mistakes
• How much money I have in relation to how much money my parents expect me to have
• How much I want to do and how I can’t do them because my finances aren’t in good order
• What will happen if I don’t improve my income
• Money-making ideas that are neither a match for my skills nor interesting to me

All of the above thoughts cause me real anxiety. They throw me off balance, to the point that I feel angry and shitty and sad.

I have permitted myself, however, to think about money in certain ways:

• How much more successful my finances are compared to the previous year
• How I am financially-independent and have been for the greater part of the last 10 years
• Different ways I can make money that are fun and interesting to me
• How I can utilize present skills to make money
• Financial intentions for the future

What I found interesting after doing this is that I can either feel terribly anxious or incredibly great thinking about the same thing. I still have the same financial situation. I still have the same financial history and financial goals. I still have the same uncertainties and income. But thinking one way makes me feel great while thinking the other way makes me feel bad.

One of my old girlfriends had a very specific concern when it came to money. She never wanted to argue about it. She grew up in a household where people argued where money was being spent on and they had big fights over it. It was a traumatic experience for her.

I agree with her. Anytime money stirs negative emotions, it stopped serving its purpose. You should pull back and re-evaluate your thoughts and concerns. Money is an important tool in our society. But like any tools, it should serve us. It should make my life better, not give me stress. It should make me happy, not make me depressed.

Technorati Tags: Money, Wealth, Concerns, Finance