Let me be honest with you. I have personally been obsessed with money since I can remember. Now stay with me, it’s not just the earning of money I am obsessed with, it’s my total financial overview. This includes the spending behavior of myself and others. I have learned over the years that getting a grip on your personal finances is such a key element of financial growth.
Tracking your personal finances is a key activity for anyone interested in financial growth, whether you have $1000 in the bank or $10 million. If you don’t know where your money comes from and where it is going, how are you able to make good financial decisions?
There are 2 basic principles for growing your net worth:
1. Increase your income
2. Decrease your spending
A business keeps track of all its revenues, expenses, and taxes for reporting and budgeting purposes. You as an individual should do the same! If you are on top of your finances, you can feel more comfortable about the future since you know what your financial status is and you will spot growth opportunities faster.
Based on the two principles above let me summarize a few tips to get a better grip on your finances:
✅Make a list of your monthly expenses and costs. The easiest way to save money is by cutting costs. If you track your expenses and categorize them honestly you will soon find that a lot of your expenses shouldn’t be happening. You want to categorize your expenses based on importance. For example, look at subscriptions you rarely make use to cancel or downgrade. Becoming more aware of your expenses will help you to prevent unnecessary purchases.
✅Save & Invest. After you’ve made a list of your monthly expenses, your next step is to evaluate how much to put aside for savings & investments every month. As a rule of thumb put aside at least 10% of your income every month, at least! Remember this: “Wages will make you a living, profits make you a fortune” - Jim Rohn.
Investing against a 10% annual rate of return can make you a wealthy man if you have got enough patience and willpower to put money aside. More on investments later!
✅Stop trying to make an impression on others. There is absolutely no reason to try to impress others by making certain purchases. These purchases can be in the form of clothing, technology devices, cars, nights out and so on. I have been falling for this trap when I was younger when I would spend quite a significant amount of money on shoes and clothing. I thought this made me happy because “I looked good” and others would think that as well. Bullshit! If you have to save up to buy expensive apparel, you shouldn’t buy it! Save and invest that money instead and aim for it to buy the nice things when you have excess money flowing in from your investments.
I hope these tips resonate with you and will help you get a better grip on your finances. It can be a true eye-opener and the start of your journey toward wealth.
Speak to you soon!