Your money. Where did it go? Many Americans start the new year wondering what happened. I am reminded of the joke about the three types of people, those who make things happen, those who try to stop things from happening and those who wonder what happened. Even if you find yourself in the category of wondering what happened, it doesn’t have to stay that way.
The first step is to decide that you want to improve your financial management. If you do, begin by recording all of your expenses for the month of January. Ideally, the total of monthly expenses will be smaller than your income for the month. If not, the crucial next step is to cut expenses in any way necessary in order to spend less than you make. The long-term consequences of spending more than you make are sort of like driving your car down the Bonnabel boat launch directly into the lake. You just don’t want to do that.
Once you know what you spent during the month, spend some time looking at the expenses. Are you happy with what you did? Did you give anything to charity? Are you saving for the future? Are you repaying debt? During the first oil crisis, a formerly successful oil field service company went bankrupt. The bankruptcy trustee asked the owners what had happened to the million dollars of cash that the firm had at the beginning of the year. The answer was that one-third had gone to sports bets, entertaining, travel and expensive meals, the other third went to custom pickup trucks, hunting and clothing. And the last third? the trustee asked. Well said the owners I guess we just wasted that third.
When you look at your monthly spending, think about how much was intentional and how much just happened without a plan. Your objective is to direct your spending so you are doing and buying things that matter to you. Without a spending plan, you could end up like the oil field service company and just waste a portion of your money.
Our experience is that after listing expenses our customers begin to spend less, but gain a better sense of contentment since the spending is intentional.
After one month of listing expenses, repeat the process monthly. If you are up for a challenging but rewarding extra task add a journal to record where you spend your time. The easiest way to do this is to keep a daily ledger divided into fifteen-minute intervals where you record what you did during each interval.
People, who bill by the hour, are already doing this at work, but you will want to include leisure time and weekends. This time journal will show you what you did during the month. Most people begin to change their pattern of behavior to deliberately spend time doing what matters.
The combination of the spending list and the time journal can be transformational. After all, while it is possible to earn more money, it is not possible to add time to the calendar. Intentionally controlling how you spend time and money can significantly improve your quality of life. This is a great way to begin the year.