The
first step to financial success lies in knowing your
financial situation at any given time. There is an
anecdote attributed to John D. Rockefeller--that as a
child he was given a monthly allowance from his
parents, but upon stipulation that he had to save 10%
of it, give away 10% to charity, and account for the
rest of it. While his parents required that he record
down to the penny where he spent it--you can be a bit
more lenient on yourself!
Track
your spending for 1-2 full months
Use
a program like Quicken to keep track of all your
personal finances. I recommend the latest version of
Quicken or a similar financial program if you already
own one. You should start out by entering in your
present-day personal checking account, savings,
investments, and cash situation.
To
complete this step, you will also need a cheap
plastic filing container or something similar. You
can purchase these for about $15 at Office Depot,
etc. As you make payments, keep track of all the
receipts you receive, the checks you write, and any
other monetary transactions you make. Like I
mentioned earlier, you don't need to be exact when it
comes to cash--just try to be, as much as you can
tolerate.
At
some later time, at your leisure, enter all this
transaction data into Quicken. As you do so, put the
purchasing receipts into the file folder under the
appropriate Category. Make separate labels for each
of the file folders-- I suggest some of the
following:
Personal
Household
Charitable
Books & Education
Dining Out
Business Expenses
Taxes
Misc.
You
can also add your own categories or remove some as
appropriate. At this point, you may be wondering why
you have to do all this. For the moment, just trust
me that it will be beneficial to you (I will explain
it later on). Also, it takes a grand total of about
10-15 minutes per week to do what I just described.
The next section, Budgeting, will take a little
longer. But budgeting also requires that you need to
at least perform the first step mentioned above, that
is, keeping track of what you currently spend.
Planning
your Budget
I
can already hear what you are going to say--oh no,
not a budget! I don't like them either, because they
tend to reign in my emotional spending or "I
gotta have it" mentality. The truth is, you are
the master of your financial destiny (not to sound
corny, but its true for the most part). If you want
to buy that fancy knickknack with the wireless PDA
attachment downloader, then by all means, get it. But
if it doesn't serve your needs in the long run, then
you will have wasted $X dollars to serve your
fleeting emotional desires. Besides, you will notice
after tracking your budget for several months where
the real money is flowing. You might buy a fancy
computer toy only occasionally, at $200+ dollars, but
eating out at lunch everyday + dinner with the
girlfriend at fancy restaurants all the time is
leaving you broke. How about going to bars? I like to
drink, but a beer at a bar or nightclub can range
from $4-$10. It's probably even more if you live in
areas like San Francisco or New York.
Anyway,
the point of planning your budget is just to get a
better grasp on directing the flow of your money. I'm
not saying that you should totally change your
lifestyle or even change it at all--but if you are
complaining about not having enough then there are
certain things you should do, mainly spend less. It
will be described later the benefits of saving &
investing your money (which you probably already know
anecdotally, but perhaps do not have extensive
experience personally).
Good
Luck!
_________
About
The Author
Shanti
Braford
Editor/Publisher
The Long-Term Value Letter
http://www.ltvin
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