Here’s a typical situation for working individuals. You feel really broke, then persevere until the next payday – which could either be monthly or biweekly. Paycheck hits the account, and you have to pay your rent, stock up on food, pay some debts you have, have a little fun, and voila! there is nothing left…
How often do you find yourself saying, “I really don’t know where all my money went”? Good news is that you are not alone, bad news is you may find yourself asking this question more often if you don’t actually do something to find out – where your money goes. This isn’t to suggest that the things you are spending your money on today aren’t justified, what I am proposing is for you to become aware of what you are spending your money on, and assess if that is in fact what you want to be spending your money on. If it isn’t, change it.
The only way to do this is to take stock of your previous spendings. For example you could review your credit/debit card statement for the previous couple of months – you may find it enlightening. It isn’t surprising that over ??% of people do not check their account statements – some have just never seen the need to, and my guess is that others would rather look away for fear of what they might find.
If you don’t like what you see and are interested in doing something about it, then you would want to proactively tell your money where to go. The simple way that I have found that actually works is to think in terms of percentages. And this is for a few reasons
- You always start off with 100% of the money you earn, so that is s a good place to start
- A dollar amount is more likely to trigger an emotional reaction, than a percentage. Budgeting should not be an emotional exercise
Here is a simple example that I have used for a while now
| Spending Category | % |
Recognize that you get to decide what each of those categories are and what percentage of your income you want to assign to each. The value you will get from this is that you put yourself in control – things aren’t just happening to you, you are making it happen. Try it.