Welcome back to the PFDN Blog; a place where we learn, unlearn and relearn everything about Personal Finance and more. For our Tribers, we hope that you have been taking advantage of all the information we share here to make smarter financial decisions and of course, if you are just joining this community, trust us, there is so much to learn and know to help you master your finance and money.
Let’s jump right into today’s topic, we are looking at “Where your Money goes”. You see that saying that ‘we are only as wise as the information we have ‘ is so true! Ask me why? Too many times our decisions are based on a flawed premise; but imagine if you make decisions having the right information, we can tell you for a fact that there is nothing as empowering as making decisions that are so smart and right!
Too many of us think our problems end once we have a budget or we save or invest…. Oh no, it is not as simple as that. You see, to master your finance, you need to know where at the very least 95% of your money goes. When you do not take the time to check your bank balance, you risk assuming what is not. You may not be spending lavishly, neither are you taking that much desired vacation or eating at that fancy restaurant; so what is it you do?
Here are some points to help you understand what may be going wrong.
Discover Your Budget Leaks
So ask yourself how you spend on a daily and try to make sure you are able to track such expense…. ACTION – limit cash transactions and do more of digital ones, it ensures you have some documentation you can use for reconciliation purposes. Where cash is used, ensure whole sum is known and record daily expenses.
Know your Financial Worth at every point in time.
So how do you plug leaks when you do not even know what you have? ACTION – it is your responsibility to know what gets into your bank accounts, what liquid cash you have, what you have spent, this helps you know what deductions are happening especially on your account you may be unaware of.
Have a Simple Budget
We cannot emphasize the need for a budget enough, however what you need to know is to have a simple budget that you understand well enough that it serves you. Trying to have something complicated is the reason why a lot of us are unable to be consistent in the use of a budget to guide our income and expense. ACTION – Do a list with a pen and paper if need be, otherwise stick to an app that offers a Budgeting Software that is so simple to use and understand. The simpler your budget the more you are able to stay the course In your cause to making smarter choices and plugging the leaks.
Embracing the Alternate way
What does this mean? When you know where your money goes, you will be able to make the desired change which may make or mar your finances. ACTION - Sometimes it is as simple as cooking your own meals instead of eating out or buying a less expensive item that serves same purpose but is perhaps just unbranded.
Create and know your expense profile
You take out cash and when you return you cant account for the money spent. You should create an expense profile, as most times you know what you spend regularly on a daily, weekly and monthly basis. ACTION – Create a personalized expense sheet for yourself and record on a daily basis your expense over a period of 3 to 6 months and you would discover that you spend on certain items either daily, weekly and monthly. With this you would be able to know where your money goes and how you can put a plug on some of your excesses as compared to your income.
The bottom line is, your discretionary spending when it is not controlled may mar the financial freedom you so desire. Stick to your budget to help establish the framework of your plan and please do live a little, all within reason though…
Stay smart and savvy, Stay Safe.
Your Personal Finance Coach