Do you want to master your money? How often does: “where did the money go?” show up consciously or subconsciously in your life? Most people usually point the direction of expenses to indicate where the money went. Conversely, how often do you notice how much money flows into your purse regardless of how little?
It is said; that gratitude is the gateway to abundance. A concept once consistently applied with money attracts more. You can harness clarity and a sense of direction by resolving to start taking note of every transaction in your money.
1. Master your money | Introducing the Transactions Log
Money In
Track the following: Salaries and Wages, Gifts and Allowance, Interests, Dividends, Commissions, Business Income, Tips, etc. See, there could be so much you are omitting.
How to master your money begins with recognising every inflow – income. Make it a habit of recording every stream as soon as you receive it.
Money Out
A money out record is one of the most powerful tools in personal finance mastery. You may not realise its value from inception. However, as days go by, you will. It is the primary signpost to financial freedom destination. It doesn’t matter whether you are doing it in order to clear debt, save or even start investing.
2. Read the record for Clarity
If you want to master your money, you must commit to tracking every coin in every transaction. Tracking tells you what and how you are spending the money. You can compare the concept of not knowing where your money goes to walking through a mist – how easy is that? Therefore, ignoring tracking is like saying you want to remain in the fog. As long as you are in it, helplessness emerges. You can overcome the mist by turning ON the lights – this is what daily tracking does.
Recording reveals so much that you didn’t know about your money. It forms a basis for sound decision-making. Once you know where your money goes, you have control to decide which way to go. Track daily, track weekly, track monthly and track yearly. Make it a lifestyle choice. Just track it.
3. Simplify
You can master your money by breaking it down into sizeable bits. Categorise your daily tracking into weeks as shown in the image – it makes it easy to read. Move with the times by turning to automation – use spreadsheets or specialised mobile apps. You could also order My Money Pot’s automated Excel tracker – all in one planner that gives you a net worth statement.
Master your money | The truth about daily tracking
- It’s not a budget, just a record. It will be useless if you only track when you feel like it.
- Track every expense—from a KES50,0000 item to KES20 confectionaries. The record is useless if it’s incomplete.
- Record the expense as soon as it happens. If you procrastinate, you’ll forget some.
- Record the exact amount – being exact adjusts your focus
4. Mindset | Isn’t this being petty?
It is if you would rather walk in the mist! The purpose of recording is to turn ON the lights and get you moving with clarity. Avoid rounding off the transactions – it could result in overstatement or understatement. Doing this long-term may compound into debt or misrepresentation of facts.
The details lie in the categories, the more precise, the clearer the picture. For instance, if you spent KES8,000 on food as a category, that looks okay. However, this is a ‘misty’ way of looking at it! A more precise is as in this figure.
The Key
5. Lifestyle choices are financial decisions
An insight into the above example as a case study:
- You are probably not conscious of your nutritional intake; 50% of your budget went to ‘unhealthy’ eating. (think about a future financial implication)
- You are outgoing; you like the experience of sampling food and the ambience of the restaurants (think about the rewards of such choices)
- You are a part-time cook in your home (think about the long-term effect)
Take Away...
Transactions tracking is a powerful exercise in personal financial wellness. The full value may not be apparent on the outset, however, as you grow into it, a clear picture of your personal finance status will emerge. If you already do not like how you are doing your personal finance, why not take it up and deal with what you know instead of imaging of what it could have been?
Very informative piece. Great work Solomon
This information is very helpful and educating