The reason you need to know where the money comes from and where it goes to is to plan for the future. That is called budgeting.
In the last article, we touched on the practice of tracking the sources of your income. Similarly, keep track of your spending. This activity is so vital for budgeting. As you know the spending categories, the amounts, the patterns, you start drawing your budget’s draft.
You don’t have to do this with paper and pencil anymore. Invest in a good personal/small business accounting software. They have become so sophisticated and fun to play with.
I’ve had some experience with Quicken. The features are overwhelming: You can track your spending down to the penny, enter your financial institutions’s details, download your transactions from those institutions to the software (so you won’t need to manually enter each spending), create cash flow charts, and most importantly to our discussion here, create budgets!
As the software becomes familiar with your spending patterns, your income, and your liabilities, it helps you create a professional budget very quickly and effectively. Of course, you must be aware of what the software is doing, and guide the processes to your special preferences.
Quicken is not the only software out there. Microsoft has Money, and there are few others. Do not use a 2nd tear software for this task. It’s worth a $70 or so investment.
Once you have your budget in place, you can use it to guide your spending from now on. But what is a budget? That’s what we’ll talk about next time. One important tip before we wrap this up: Always prepare your budget, especially the personal one, with your significant-other. She or he must be involved to avoid conflicts down the road. But more importantly, sharing this is a sign of mutual respect, and hopefully, love 🙂
The Wealth Maker
