Gain Control Of Your Money

It may take a few minutes out of your day, but making a habit of organizing your financial life will save you money and help you gain control of your finances.

Sherry makes $8,000 a month. Yet, she finds herself with less than $50 in her account by the end of the next month.

“I don’t understand it, I don’t know where it all goes!” she says in frustration.

That might sound familiar: making money is one thing; keeping it is another thing altogether. Many people think that the trick is to make more money than you can spend — but that line of thinking is hopelessly flawed, because we can all spend money faster than we can make it!

Gaining control of your financial life starts with getting organized and knowing exactly where your money has gone. Most of us have one stream of income coming in to our bank account. But we have many holes in this bank account, through which money disappears to pay for various things.

Robert G Allen, author of the New York Times bestseller and personal finance classic, Multiple Streams of Income, says that our expenditures can be sorted into 10 categories:

1. Giving (to charitable organizations, or church etc)
2. Saving
3. Income tax
4. Shelter (house payments)
5. Household expenses (like food, clothes, cable TV, Internet broadband)
6. Transport expenses (car payments, gas and other expenses)
7. Fun and entertainment
8. Insurance
9. Debt and miscellaneous (like the education loan you are still paying off)
10. Business expenditures

Allen studied the habits of prosperous people and discovered that they spend a few minutes a day categorizing their expenses. It is these key minutes that differentiate prosperous people from the rest of us.

1. Prosperous people plan their purchase. They buy things when those items are on sale or unpopular, and they pay a low price.
2. Prosperous people ask for discounts — and usually get them.
3. Prosperous people as for receipts — and always get them.
4. Prosperous people always examine the receipt for errors.
5. Prosperous people always write on their receipt a category number
6. Prosperous people balance their accounts to the cent.
7. Prosperous people file the receipt as soon as they get home.

If we start today, we will start gaining more control of our finances within three weeks.

Planning ahead saves money. If you’re at a funfair and see bags of goodie-bag items (rattlers, whistles, yoyos) going for rock-bottom prices, buy them in view of your child’s next birthday party. Planning ahead can save you at least 10 percent — you won’t be buying these same items at double or triple the price a week before your child’s birthday!

Planning ahead works if you are disciplined too. Make a list when you go shopping for groceries and stick to your list. Don’t be tempted to pick up two boxes of ice-cream just because you’ll be saving $2. You’re on a diet anyway.

Filing receipts seem like a chore, but Allen suggests putting your receipts into 10 different large envelopes, each marked with a category.

Filing your receipts makes filing taxes a lot easily. If you get tax deduction for business expenses, and you can produce your receipts for your printer, scanner, laptop, maybe even a box of pens, you can claim these expenses the next time you file your taxes, because you have proof of your spending. (Of course, your items must be directly related to your business or work).

Keep track of your expenditure this way and you’ll find after a month that you’re feeling confident and in control of where your money is flowing to. You will have started to get disciplined about your finances — and discipline brings great rewards.