Importance Of Watching Where Your Money Goes…

Until you start tracking where your money goes, you’ll find it difficult to stay on course to become financially independent. If you are serious about building wealth, you have to make a lifelong commitment to understanding where your money goes.

The key to wealth building is not the amount of money you make, but being aware of what you can buy and when you can buy it. We all have seen people who make high salaries file for bankruptcy because they spent more than they made. But the most interesting thing is, that studies have shown that most ordinary people pay enough in interest over the course of their lifetime to become millionaires. Why? They don’t have a plan, but they have an “I want it now” mentality, and this leads them to buy things before they can afford them. As a result, they finance the purchases and pay exorbitant amounts of their hard-earned income in finance charges.

This will help you get a head start on financial freedom

The sad part is that these purchases are not all big, expensive items. More often than not they're small things like going to a movie, eating out in a restaurant, buying a new dress, or any of the thousands of other things they charge on their credit cards. Instead of asking, “Can I afford this?” they ask, “ Can I make the payments?”

For a start, you need to track your purchases every month to determine where you are spending your money. This is a valuable exercise. Before you can establish a plan to achieve financial freedom, you have to be honest about what you are currently doing with your money. You can’t just spend it and expect positive results. This exercise is important because it may reveal that you are already living above your means. If this is the case, then no matter how well-intentioned you are, you can’t build wealth. The first thing you need to know is that budgeting is flexible. Preparing a budget merely established what you plan to do with your money. It becomes the benchmark against which you compare what you actually did with what you planned to do. If worked and followed properly and consistently, a budget can become a tool that helps you make the kind of financial decision that lifts you from the Lifestyle of Ordinary to the Lifestyle of Success.

One of the biggest reasons ordinary people have a problem with financial planning is that they think it is too complicated. Have you ever met with a financial planner and walked away from the meeting wondering what he or she said? Could it be that if they simplified things, you wouldn’t need them?

First, you need to understand that financial planning is different from debt counseling and investment counseling. Debt counseling helps you get out of debt if you are already in the hole. Investment counseling helps you decide where and how to invest your money once your financial house is in order. And finally, financial planning is what you use to put your financial house in order.

Some of you may have adequate income, you just need to manage it better. Some of you may find that you have to reduce your standard of living temporarily, or that you must earn more if that’s easier to do than giving up things to which you’ve grown accustomed. No matter what your situation, you need to establish a course of action that will take you to financial independence.

Most responsible people will have some extra money after paying their bills. What you do with these funds is what determines if or when you achieve financial freedom. But many people view life as drudgery and complain that they simply work day after day just to survive. The pressure this place on them mentally often results in binge spending which invariably puts them deeper in the hole and subjects them to an even more depressing life of hard work and toil. It’s a vicious cycle that becomes as difficult to break as a drug or alcohol habit. If you are already caught in this cycle, you need to break out of it. True, everyone needs to have some pleasure in life. Things like dining out, vacations recreational activities, and hobbies are important to a healthy mindset as anything else. You’ve heard it said that there’s more to life than just making money. There is also nothing more stabilizing in life than having solid control over your finances and watching the security of growing your nest egg.

This will help you get a head start on financial freedom.

The bottom line is, that having a budgeting system allows you to take control of your finances, enables you to know when and how much you can spend, and prevent you from making hasty and often expensive mistakes. Sure, it takes a little time and effort to make it work and maintain it, but the value you receive will far and away offset any inconvenience.

That’s all for now, friends. See you in my next article.