Uncover Your Money Drains: Improve Your Financial Outlook
Keep track
Where is Your Money Going? I’m talking about every last cent. Do you know where every last cent goes? At the end of each month, do you find yourself wondering where all your hard earned money went?
The truth is that most people – most people! – actually don’t know where all their money is going.
Working out what your personal financial drains and leaks are can enable you to make sure your money is working for you, instead of just disappearing like the kids when chores have to be done! As boring as it can sound, savings, bill and debt repayments and retirement planning don’t just happen – you have to spend time and money on working on those or other things that will be important to you sooner than you think.
You’ll probably have to do some detective work to find out just where all your money is going every month. There’s no magic way to do that. You have to put in the time and effort looking at your finances to account for every cent – then you can move toward your financial goals with knowledge.
Some of the things you’ll need to do may be obvious, but it’s often useful to see even obvious things written down. Try these tips for discovering money leaks. You can then work on a sensible budget that will allow you to plug any money leaks and brighten your financial outlook:
1. Know your incoming – Calculate all income. The first thing to do is calculate all sources of income for your household. Put together a chart listing income sources and amounts for the past 30 days. This will give you an idea of how much money is coming into the household, which is the first step to determining how much money is going out.
Track your money
2. Know your outgoing – List your expenses. List all of your regular monthly expenses such as rent or house payments, car payments, credit card and loan payments, gas, food, utilities, cable, internet and others. Try to list exact numbers, or estimate if your expenses vary. This will give you a good idea of what your basic expenses are.
3. Account for every penny. Money should be working for you, so find out what it’s doing and when. Spend an entire month tracking every cent that you spend. Write down your beginning balance and then every dollar in and every dollar out. This is the key to determining where you’re losing money. This is one are where your computer can really help you keep a good track of things. You have to have the discipline to record everything, but you’ll find that when you get into the habit of doing so, it’s actually quite fun. There are various packages available to help you keep a track of your spending and we’ll be reviewing some of them later.
4. Interpret the results. Compare how much money you’re bringing in to how much you’re spending every month on bills and other expenses. Are you spending beyond your means? Are you allocating money for savings, investments, and retirement?
Interpret your findings
If you have money drains, determine what they are. Are you spending $4.00 on an iced latte Monday through Friday? Is your dining out expenses much higher than you expected? Are you eating from vending machines or expensive fast-food joints at lunch rather than brown-bagging it? You don’t have to do without an occasional treat, but you should at least know what it’s actually costing you – you may get a shock!
5. Use the information you discover. They say that knowledge is power, but that’s true only if you use the knowledge. Armed with your written guide to your income and expenses, you can control your finances more effectively. Once you have this information laid out in front of you, it will allow you to fine tune your finances little by little until you’re putting more money into savings and less into “money drains” from month to month.
Use what you learn
Determine ways to reduce these money drains. Can you brew coffee at home to save money every week? Can you cook at home to save money on eating out? A few dollars saved every month in different areas of your budget can definitely add up to your benefit.
Once you know how much money you have coming in and going out, you can start directing your money toward what’s really important to you. Trim down your expenses – do not overspend! – or find ways to increase your income so you’re not spending beyond your means.
Your financial future will shine much brighter when you enable yourself to prepare for the future you desire.
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