Where is My Money?

You may often hear refrains like, “I don’t know where my money goes!” One of our friends, the Finance-Head of a company quipped, ‘I leave it to my wife; she handles our personal finances…I cannot’. Neither earning a big pay check, nor heading a business finance division can necessarily guarantee success in personal finances. The fundamental problem is that most of us do not have clear guidelines for spending money. We are unable to budget our spending, often buy what we want without restraint, or have no plan to save or invest for the future.

But you do not have to continue this way. Things can change for the better! So, then how do we manage personal finances? Not just by earning your dream salary but by learning the art and science of personal finances. Here are some of the basic principles that could aid your personal financial management.

1. Account for your past spending; to determine your spending style
   Before spending your money, you must decide where (the purpose) and how much (the limit) you can afford to spend or have been spending. It requires basic planning. You may start with a dailyaccount of the details of where you spent your money. Maintain a pocket-book where you can quickly record your expenses. Daily, just before you go to bed (or another fixed time), account for every detail of your spending.

   During this time review your weekly / monthly plan in order to determine your next day’s spending. In short, know where you tend to spend your money and make sure you do not overspend nor spend in an unplanned manner.

2. Plan your spending – budget it and stick to it
   Planning includes
   (a) clear knowledge of actual income and actual expenses – clear allocation of resources in order to maintain oneself – housing, health care, vehicle maintenance and transport, schooling, debt clearance, tax, bills etc and
   (b) clear allocation for regular saving and intentional investments. With easily available credit facilities such as 0% interest, buy-now pay-latter, buy-two take-one free, and credit card schemes; internet banking options and debit cards, if self-discipline is ignored, one may end-up spending more than he/she has earned.

   Indiscriminate spending or spending impulsively can become a habit and it could play havoc in your personal finances. Therefore, prioritise how you are going to spend the money that is with you.

3. Spend within your means; save at any cost
   This means you are equally prioritising your need to maintain yourself and your family, and the need to planned savings and planned investment. In other words, it is spending only the money you have set aside to maintain yourself and family, and not your allocated savings and investment. This involves thinking through options for cutting down on spending, without compromising on savings and investment.

   Although, the savings is meant to aid in emergency situations, it has to be considered as a reserve, and if unspent to be allocated to charity or investment. Savings is meant to ensure that a distress-borrowing is eliminated; especially so in times of emergency situations. In the market-led economy, where “buy” and “spend” schemes scream for attention from every poster and advertisement and “saving” is being relegated to the quiet voice of one’s conscience, it is imperative to live by principles and values agreed together with our spouses and children.

   Stop lying about money to your spouse and find creative ways along with your spouse to involve your children in your personal financial planning. For example, you can devise a regular family activity to track your spending – each one identify where their money is spent month on month Saving is not how much you save but how early you start saving. Early savers make bigger money than big savers that started saving late. Start a budget and follow it Stop borrowing money from family and friends Do not take responsibility of a loan for your friend or relative blindly. If you take it on, evolve a transparent system and make sure your friend or relative subjects oneself to accountability. Be prepared to repay loan in the event your friend or relative fails to. Explore how you can earn more money legally and creatively by way of using your resources – knowledge, skill or interest Do not let making money rob you of your essential time for yourself and your family. Learn to balance what is important in your life.