That was far from what is happening today. If I am not paid through check, my earnings are deposited directly to my bank account. I use the debit or credit card to exhaust my money. Practically, the bank takes care of my money. They keep my money, dispense of it, and I am left to understand where my money goes.
Can you relate with my story?
To be on top of your money is to understand what goes into your treasury, what comes out of it, and where exactly it goes. Financial freedom means taking charge of your money, like the good old days when, as a kid, you act like a financial expert.
If you are not on top of your finances, here’s how you be.
1. Gather all documents that pertain to your expenses over the last two years. This may include bank statements, pay slips and paychecks, ATM receipts, credit card bills, and many more.
2. Sort out your expenses by categories. Among the most common categories are food, utilities, education, and rent.
3. Make a rough calculation of how much you have spent for each category in the last two years. Divide the sum by 24 months. It gives you your average spending for each category every month.
4. Total all the average expenses and it will give you the nearest picture of how much is your monthly cost of living. Remember that you are dealing with averages and it means your actual spending is somewhere within the range of the amount.
5. Add another 15% on your monthly average to cover inflation, unexpected expenses and other hidden payments.
6. Compute for your earnings (what comes in) from all sources. Include only the amounts that would indeed keep coming. Skip occasional earnings.
7. Compare your earnings with your average monthly expenses. This will give you an idea where you stand.
So, are you on top of your money? If not, make the necessary adjustment. You may want to find an extra job to help finance your expenses. Or better yet, you might want to consider curbing some of your expenses and start living within your means.