For this step you have a choice: you get to decide if you’d rather do an art project (right brain folks) or a spreadsheet (left brain folks). Either way, you’ll use your handiwork to visualize your income and expenses from the Monthly Tabulation (Step 3). The chart will show you the trend in your financial situation and will give you a sense of progress over time. The transformation of your relationship with money will be right before your eyes.
Right-Brain Folks (art project):
Get a large sheet of graph paper, at least 18 by 22 inches, and draw a graph on it. FITF reader Jeremy told me about a site where you can make and print your own graph paper. The horizontal axis represents time (months), and the vertical axis represents money. For the later, choose a scale that allows plenty of room above your highest monthly income (you’ll see why in Step 7). Use different-colored lines for expenses and income.
Left-Brain Folks (spreadsheet):
If you’re the kind of person who chose a spreadsheet over an art project, I trust you know what to do here. Just plot your monthly expenses and income, and have the program generate a graph for you. Here’s mine:
Side note on constancy: See that first big spike in expenses? That month we sold our house at a loss and it cost us. The second spiky month (July), we came into some money and immediately paid off debt. I could have skipped tracking those months, with the rationale that they weren’t “ordinary” months. But really, what month is “ordinary”? It’s more important to make a habit of following these steps every month, and not evaluate how your month went relative to some “ideal” month. Just do it!
This chart will become the picture of your progress toward Financial Independence, and you’ll use it for the rest of the program. In fact, in Steps 6 and 7, we’ll cover ways to make the expenses line go down and the income line go up, respectively. And in Step 8, we’ll add a 3rd line to the graph that will totally blow your mind! So if you plotted it on paper, put it somewhere you can see it. If you use a spreadsheet, save the file on your computer desktop where you’ll notice it. If you used Google Docs, just remember to look at it next time you’re in The Cloud.
PS: I’m curious to see if I have more right or left brain readers, so please take this quick poll: