If you are constantly wondering how much money you still have and where did the rest of your money went, you may suddenly find yourself in financial difficulty with hardly a clue how it happened. With one's personal finance, ignorance is never bliss because changes in spending and saving habits creep slowly over time. Only vigilance in knowing where you are can keep you in check and going in the direction you intend to go.There are a number of things that makes it difficult for some people to ascertain where they are financially:
1. They don't know what to do.
2. They know something, but don't know if that is correct. And so they hesitate in doing what they know. Or they simply don't know how to go about applying it.
3. The personal nature of finding out about their own finances makes them cringe at the thought that they may be actually failing in this aspect of their lives.
4. They feel that what they will find out will require them to make significant changes in their lifestyles.
Managing one's finances well comes with experience. And it will almost always introduce change in your life. The important thing is for you to "own" this change, and not have it forced upon you. The problem with some financial management books is that they require you to do too much too soon. In some cases, they require you to adopt certain approaches that do not fit the way you run your day. Granted, managing your finances require organizing and planning. But it should be in a manner that does not hamper you unduly.
Taking Small Steps
There are a few simple things that you can start doing to slowly introduce yourself to the discipline of handling your finances. As a start, you can try to see where you are in the short-term.
Your Disposable Income
This is simply the money you have after deducting your monthly expenses from your salary. You would think that this is a common thing to know, and yet people receive their income and hardly consider how they spend it. If you can sit down and be able to recall how you spent your money last month, then you have taken a very important first step in managing your finances.
Your Cash Balance
This is the money you have, at hand and in your bank accounts, minus any other payables that is not automatically deducted from your salary. Your money include those that you have on hand and what you can have with you immediately, like savings/ checking accounts, time deposits, and short-term investments in government securities like Treasury Bills.
On the other hand, your payables are what you would need to pay for the whole year. The most common item here is credit card debt. Other items include regular payments for tuitions, maintenance, and the likes.
Why a year? For one, a year is a normal cycle, where the monthly ups and downs gets to be evened out.
The resulting cash balance will tell you at a glance if you are still in the positive, and what level of monthly disposable income you need to have in order to stay that way.
These two things are so common and simple, and yet most people would spend some time finding them out if you happen to ask them. Yet, the mere knowledge of these two items is invaluable in starting to handle your finances. They give you a shortcut on whether or not you can take that new gadget on credit, or if you need to cut back on that subscription, and other similar decisions. And like most knowledge, it immediately and quite unconsciously affect the way you handle your finances, especially your spending.
Take some time to find out your cash balance and disposable income and reflect on them. Those Aha! moments that you discover for yourself are really more important than any nugget of wisdom I can impart here. For the simple reason that this is all about YOU.
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