Manage Your Money, Don’t Let Your Money Manage You!
By Jeremy Woods
The most common financial problem in the average household is organization; many people simply do not effectively manage their cash flow. It is nearly impossible to control your finances without a working knowledge of your expenditures. We all have financial goals and aspirations and the first step to reaching your goals is controlling your cash flow by tracking your expenses.
One effective means of tracking your expenses is not carrying cash, this forces you to use your debit card giving you easy, direct access to your expenses by way of your bank statement. Do this for one full month and then sit down with your bank statement and make a list of your expenditures during the month. This should include your housing cost, utilities, groceries, automotive expenses, entertainment, etc.
Once you have a list, total your expenses and compare it to your income; if you are one of the fortunate few, your income will exceed your expenses. However, if your expenses top your income you are overextended and until your expenses are reduced it will be impossible to make positive progress in your financial life.
Now that you have an accurate depiction of your expenses it is time to create a budget. The importance of a budget is to allow you to determine how much expendable income you actually have and where you need to make cuts in order to achieve your goals.
Your budget can be as simple as a handwritten list of budgeted and actual expenses or you can create or download an excel template. There are many free downloads of templates which can be used to create a budget at microsoft.com. Once you have the format to create a budget the most important thing is that you are realistic with your expenses and that your budgeted expenses not exceed your net income or simply stated; it is important that you live within your means. If after budgeting for your expenses, you determine that you still have expendable funds consider opening a savings account with an online bank such as ING or HSBC; however, be certain to account for savings in your budget each month. Once your budget is in place; be sure to track your spending and determine the amount that you under or over spend each month.
Now that you have a budget in place you can begin to plan to achieve your goals. Remember, however, that just creating a budget will not solve all your financial problems; you must attempt to live by your budget for it to be an effective tool. Your finances do not have to be a headache as long as you are managing your money rather than your money managing you.