Irrespective of your financial situation, your situation with money is a very different topic. How you manage your money and whether or not you track it, is a whole different story.
You could be battling to pay your monthly bills, living salary to salary, fully aware of your discomfort.
Perhaps you’re in a relationship, and you enjoy a dual salary with limited monthly expenses as a couple and reckon you’re ‘coining’ it.
Alternatively, you could be financially oblivious as to what goes on within your bank account, and not consciously aware of your personal finances. They’re in the background. That’s not a good place to be.
In this day and age of credit cards and lines of credit, it’s easy to have your finances go astray in the mire of rolling pay days, overdrafts and minimum payments on credit cards. On the surface, things look peachy, while you slowly and unwittingly, like a frog in a pot of water, accumulate debt.
If you don’t track your money, be ready to lose it.
Your net effect
Your particular monthly result can be thought of as the difference between what you earn and what you spend. It’s what’s left at the end of the month, or what’s not left (debt). We’ll call it the ‘difference’. If you tend to run out of money near the end of the month, and perhaps you’re completely cleared out by payday, then we really need to have a little talk, because you’re just not going to be able to sustain that in the medium and long term. But, it’s not all doom and gloom though.
If you don’t know whether you end up under or over at the end of the month, you will need to work it out.
If you feel that knowing what your difference is applies only to people with a negative result and you’re pretty sure that your presumed monthly surplus absolves you from this exercise – LOL sorry for you.
So why track your money?
The first step in most twelve-step programs is admitting that you were powerless over your addiction and that things had become unmanageable.
Arriving at the bleak conclusion that, financially speaking, you’re potentially worth less than zero is not fun. But until you can see and comprehend how the indisputable laws of primary school maths mean that your current course is unsustainable, your situation will never change.
To add a further quick cautionary note…
No one wants you to hit rock bottom before you realise that something needs to be done. There’s nothing romantic about that, and as far as personal accounts of your financial journey go, rags to riches stories are overrated. Don’t be fooled into thinking that there is plenty more time to make more money and that you can sort it out next year. Next year the problem will be bigger and harder, and who knows what additional challenges you may be facing.
No-one will look after your money for you; that is your job and only yours.
Debt-free and skipping through a field of daisies
If you’re not battling month-to-month to manage your cash flow and you have a surplus (or think you do), to make that surplus work, you need to know what you have to work with. Are we talking several hundred rands or several thousand rands? All amounts are meaningful, but you’ll need to know what you might be able to commit to achieving your goals.
Lay a foundation for financial awesomeness
Setting financial goals is vital to success, but without knowing your actual spending situation it’s really hard to know what is possible or not. Committing to successfully tracking your spending and witnessing your potential shortcomings or successes (it’s not all doom and gloom in the personal finance world), and balancing your income and expenses, could become a meaningful goal for you to start with.
With many goals competing for limited resources (likely cash), tracking your spending will allow you to see what resources are available for allocation to the things that matter to you. What are your priorities and what are you spending your money on? More like, is your spending in line with your priorities?
By tracking your cash flow, the hope is also that you’ll start to see money as more of a commodity or a tool and not something that reigns over you, thinking that money solves more than just financial problems.
The Budgeting 101 workbook gives some practical ideas on how to track your spending and see what you real difference is at the end of the month.
“The cost of being wrong is less than the cost of doing nothing”– Seth Godin