So often I talk to or see clients who have no idea of where their money goes. They might know what they earn but rarely know what they spend. So here are a few tips to ensure you are right on top of where your money is going.
My first tip applies to everyone, whether you are employed or self-employed and it’s know exactly what you are earning.
Now I don’t mean just your annual gross income, but how much you are earning on a weekly, fortnightly or monthly basis.
Both before tax and then after, so that way you know how much tax you are paying as it can make a difference should you wish to do any investing down the track.
Once you know what your gross income is, then let’s look at your expenses. Now I know what a number of you will be saying – no please don’t make me do a budget, I’ve done one of those in the past and it doesn’t work, or I know exactly what I’m spending my money on!
But really, do you?
We often find clients who think they do, but once they actually start tracking where their money is going, then they get an awful surprise which is often a rude shock.
After all how empowering would it be to look at where your finances are at any point during the year and understand;
* Where’s the leaking bucket, if you have one
* Where are you making money, and
* Where are you spending money
It’s about measuring, monitoring and reviewing on a regular basis, we recommend at least monthly as you can then see patterns and pick up any anomalies. Any longer between reviewing income and expenses can lead to blow outs.
Use the traffic light system – so you know whether you are on target, neutral or behind. What taxes are you paying?
And are you fully insured in the event of an illness or injury, after all the best laid plans will be torn up if you want work for a period of time. This extends to reviewing life insurance for both spouses, especially if you have debts or dependents.
Check out JBS’s “Cash Coach” program to find out how you can run your finances like a business.