Manage the Money You Have Now

The first rule of money management is to manage the money you have now.

It means you need to know how much money you have to work with monthly. I’m not talking gross figures here. We’re interested in your net income - the after-tax amount that you bring home if you receive a paycheck.

If you’re self-employed I’m talking about your average monthly income after expected business expenses.

Step two is listing your expenses. Yuck. Yep. Write it down. You aren’t guessing. It’s September. You’re serious.

What do you owe? How much have you agreed to pay out monthly? Let’s do a self-audit. Open all the old mail piling up on the corner of your desk. It’s time. Remember to shred all papers with your name and address on them except the most current bills. Look at them. Really look at the balance. Are you surprised? Now you know your account balances, which is always better than not knowing. Now you’re in control.

Let’s say you bring home $10,000. It’s a nice round number. It doesn’t  matter how large or small the net number is. This analysis is about how you are going to work with what you have. And later we’ll focus on how you’ll make more new money.

Let’s say your bills - rent or mortgage, car payment, credit cards, household expenses  - total $6,500. That’s before you itemize your monthly living expenses like food, clothing, transportation, and lunches. List your living expenses now. What’s the total? Are there any other expenses not included in these two expense categories? If so, add them to your list. Let’s say the total comes to $2,400/month. Therefore your total monthly expenses are $8.900. Wow!

Subtracting your expenses from your net income, your balance is $1,100. Congratulations! You have positive cash flowing in at the end of the month.

You have choices. How much will you save? How much will you put in an Investment fund? What other plans or dreams do you have for your money and your life? Now is the time to effectively manage the money you have. Stay focused on where you want to go.

How realistic is this example? What obstacles have you encountered as you manage your money? What tips have you learned? I’d love to hear about your experiences. Add a comment and let me know what you’re thinking. Thanks!

Warmly,
Judith

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