Where does your money go? Let’s face it – you can’t progress in your financial journey without a keen understanding of where your money goes. How about a little test to see if you’re on track financially? Please attempt to respond either yes or no to the following questions:
- Do you regularly run out of money before the end of the month?
- Do you usually wonder where your money goes?
- Does thinking about money cause you to fret, worry or fall into a depression?
Now if you answered yes to one or more of the questions above chances are that you cannot account for your money. There are inflows and outflows on a regular basis but sadly you haven’t been keeping score. Not keeping tab on your money is one of the easiest ways to poverty and lack.
What if you’re not a frivolous spender?
You might be saying to yourself, “I don’t spend frivolously or lavishly, I live within my means,”. But at the end of the day you keep wondering what happened to the money that came in.
Well I have the answer for you – the money disappeared because of what you decided to use it on. Your choices determine where you want your money to go.
This is why it’s extremely important and necessary to keep records of what came in and what it was used for. We all need to have a budget system in place to plan for our money before it comes, and then to review whether we put it to the best use after it has gone.
The importance of budgeting and planning cannot be overemphasized. It can make the difference between a happy and a depressed financial life.
The truth is we all have plans for what we want to do, where we want to go, and a host of other worthy goals and pursuits; but we don’t bother to plan how to effectively utilize our resources in order to achieve our heart’s desires. Whatever we desire will require resources to achieve them which must be within reach.
Here are ten advantages to knowing where your money is going:
Better control of your financial destiny
You can focus your spending on things that are more beneficial and in tandem with your goals. Thus you can make changes or even change course or direction when it suits you.
Your budget is your financial report card
It shows you at the end of every month where you have performed beautifully and poorly. This will cause you to make corrections and learn from your mistakes when you constantly know how you’re performing.
You can prioritise and decide in advance where your money will be going.
You’re less likely to be lost and bewildered as to where your money went if you plan before you spend.
Helps you organize your spending and savings
By dividing your money into categories of expenditures and savings, a budget makes you aware what expenditure takes which portion of your money. That way, it is easy for you to make adjustments. It also serves as a reference for organizing your bills, receipts, and financial statements.
It shines the light on your spending habits
You are on your way to curb impulse spending
Budgeting is the major excuse for not going on that impulsive buying spree. Once you get the hang of using it unnecessary expenditure becomes something that will upset the balance of your budget and you start to avoid it.
Bank balance consciousness
You will become more attuned to knowing what you have left in your accounts at any point in time, because you now keep 2 records – amount spent which is taken from your bank balance, and the amount that is left which is your current bank balance at every point in time.
Relieves financial stress
Knowing your exact financial situation lifts a tremendous amount of stress off your shoulders because you don’t have to worry about the unknown. Even if your financial situation is shaky, you will be spending time fixing the problem and not trying to find out what the issue is.
It forces you to think more about money which is necessary for wealth building. The more you think the more strategies are developed to combat poverty
Knowledge about your money is a powerful advantage
Knowledge is power. Keeping track of where your money is going will open your eyes to exactly how much you need on a monthly basis. This will help you in building an emergency fund for unexpected expenses and how additional expenses will affect your financial health.
The next step is to start tracking your expenses using a smartphone app, or by purchasing a spending diary. Commit to recording what you are spending on, and also planning your next weekly or monthly spend before that money comes in.
The discipline of looking at your inflows and outflows will give you more power and control, thus enabling you to make wiser and better planning decisions.
Wealth and riches are the result of wise and careful planning. Remember that those who fail the test of managing ten thousand will definitely fail when called upon to manage ten million. In these challenging times money management is key.