Track Debt
Credit-card fees and interest charges should have their own category. These are the costs of using the credit card, not specific items purchased.
Similarly, if you are paying down a debt, such as a mortgage or loan, it is important to separate interest expenses from principal payments. Remember your personal balance sheet? Paying off principal decreases your liabilities (yay!), while interest and other fees that represent the cost of borrowing money are just money spent and gone. Also separate out expenses like homeowners insurance and property taxes.
Case Study: Chris’ Debt-related Categories
Chris has many different types of debt and would like to start decreasing that burden. So Chris’ family tabulation is broken down in a way that helps them evaluate how the various types of debt are affecting household finances, as well as track how much debt principal is paid off each month.
Similarly, if you are paying down a debt, such as a mortgage or loan, it is important to separate interest expenses from principal payments. Remember your personal balance sheet? Paying off principal decreases your liabilities (yay!), while interest and other fees that represent the cost of borrowing money are just money spent and gone. Also separate out expenses like homeowners insurance and property taxes.
Case Study: Chris’ Debt-related Categories
Chris has many different types of debt and would like to start decreasing that burden. So Chris’ family tabulation is broken down in a way that helps them evaluate how the various types of debt are affecting household finances, as well as track how much debt principal is paid off each month.