Understanding where money goes, month on month, is not an easy exercise.
But once mustered, we can tell our money where to go, rather than chase where it went.
That is, we can be masters of our money, our life, our sense of security.
How to begin tracking?
Keep receipt of each expense. You can collect them in a dossier or a drawer clipped together for each month. These would be receipts of all cards, online and cash expenses.
Have access to your bank account online to see when transactions are recorded, what bank expenses are charged to your account.
Use our tracker to start listing the amounts next to each expense item. We think we have included all categories but items are missing from our tracker, then add a line and include it in your monthly list.
Must dos and Wanna dos
We have separated the categories into Must do expenses – those expenses that are necessary to keep the household ticking. Such as the rent, schooling, groceries, utilities, insurance, health costs, taxation, loan repayment, credit card monthly balance and so on.
The Wanna dos, that are those non household critical expenses but are nice to have to keep us entertained, networked with friends, such as deliveries, restaurants, take away coffee, online shopping, beauty, hairdresser, gym and so on.
In the must do category, we have included a line on Savings as we consider it a Must do budget item.
We have two categories of savings:
o A short term “cushion” of savings for emergencies. A good measure is to aim for savings of 6-9 months of Must do living expenses. It could be a piggy bank of small amounts (affordable small amounts each week).
Save for fun projects such as travel, art, home maintenance and renovation, buy a new car and so on.
o A long term saving for the future life in retirement that is linked to investments, pension related savings.
Once the sums are added – must dos, wanna dos and savings, would indicate if spending is more than earning.
If there is excess cash, if you are on a good track to save more, grow the value of your money through investments.
If you are spending more than earning then you can prioritize your expenditure or look at items you can dismiss or spend less money on. Decisions can be made on saving first before spending on holidays (rather than use the credit card for holidays; or to buy an expensive piece of clothing, or art and keeping your balance in perpetual debt). Creating pots of savings for our expenditure creates ease of mind and more enjoyment of life.
The Monthly tracker
Forward Looking Cash Flow.
Once you have a good idea of how much money you need to keep the household going, then you can identify the monthly expenditure ahead of time. This is especially useful as you can identify those ad hoc expenses that get us off track, and into debt.
The idea is to tell your money where to go instead of chasing where it went. This creates a sense of comfort with your finances that supports a stress free quality of life.
It is ok to set goals in life, for owning a house, or going on vacation, and it would be great to save, invest and grow the value of your money in order to achieve your life’s goals.
Small steps matter more than big ones.
Awareness of what determines quality of life for each one of us, working through our goals, including how we treat our money, is empowering.
Our Monthly tracker and forward looking cash flow are useful tools to use in creating clarity for goal setting and money management. You can get your own copy of our cash flow tracking tool by going to "Tools" and downloading it.