I’ve been there too. I know the uncomfortable feeling.
It’s kind of depressing. You feel like your living check to check. You have nothing to show for your hard work. Instead of feeling like you should act, you feel numb. Well, this is your wake-up call. More time will pass by, and you will feel stuck in life, at your job, and in your environment, if you don’t make changes now.
Knowing where your money is going means that you have control of your finances and not vice versa. Not only are you telling your money what to do, but it is always working. By working, I mean that your money is earning money. Whether it is invested in your 401k, brokerage Roth IRA, other brokerage investments, high yield savings account, etc.…
Here is how you can ensure that you keep track of where your money is going. You don’t have to do all these things. Pick and choose what resonates with you.
Track your spending
This is the number one way to know where your money is going. Write down every single purchase that you make. You can track your spending in an app, a notebook that you always carry, or on Google Sheets.
I find the app to be the easiest for tracking daily spending. The only time that I don’t track on the spot is if I go to Costco or Target where my purchases cover various categories. I review my receipt once I get home. Other than that, I input my expenses into my app wherever I am. I have the option to write notes on the app to track my expenses. That way I know exactly what I spent on especially if the spending is irregular.
Keep a spending journal
Write about what you bought, why you bought it, and how you feel about the purchase. Process your feelings about how you are spending your money. Make sure that your spending is adding value to your life. If not, write about how you can be more intentional with your spending. What need were you trying to satisfy by making the purchase? How can you satisfy that need without putting yourself under a financial burden?
Make a list of what you need and only purchase items off that list
Keep a running list for the market and anything else that you need to purchase. Once you are ready to shop, that item will have sat on your list for a few days. Decide if the item is still needed. When you shop off your list, stay focused on items that are on the list and nothing else. It will help keep you mindful of your expenses. If another item comes up as needed, add it to the list. Do not purchase it at that moment.
Have a household budget
Create categories for all the items that you want to spend money on monthly. Your list of categories should represent what you and your family value.
Assign numbers to each category based on the average that you spend for each category monthly. Add all the numbers and ensure that it does not exceed your monthly household income.
It takes 90 days to have a solid budget in place. Be consistent and trust the process.
Have funds designated for specific uses
How many accounts can you manage? Around 5 sounds good. Here is a list of how some people organize their money.
Checking account for monthly bills. Fun money can be here or in a separate fund.
Emergency fund in a high yield savings account.
A brokerage account for retirement and/or work 401k.
Sinking funds for yearly expenses like subscriptions, holidays, health, transportation, home repair, and vacations. Items to have a cushion for that are considered non-emergencies.
Have written financial goals with action steps
Having a written financial plan keeps you focused on the big picture. If you want to reach financial freedom, define what that means. Does it mean having an emergency fund and no debt? Does it mean having enough to quit your job at any time without worrying about paying your bills?
Your goal could be to be in control of your finances. That can be done by taking some of the steps given here.
You will be surprised how time flies when you don’t know where your money is going. You will be filled with regret when you look back and have nothing to show for all your hard work. You should always be in control when it comes to money. Start telling your money what to do today and you will be much happier.