Lesson 3 – Know Your Money
- July 20, 2021
- By: Greenpath Financial Wellness
It may feel like we are getting to this step a bit late in the process. Most coaching programs want you to start by creating a budget. Unfortunately, budget is a negative word for many people. We hear the word budget, and we may think it is restrictive or overwhelming. Suddenly, the things we felt and learned about money come creeping in, and it may trigger a reaction we do not want.
In addition, many people think of a budget as a one-time event. Tracking our spending and identifying where our money is going is a habit we want to cultivate. Tracking our spending is something we should be doing daily, weekly or biweekly depending on what works best for you.
Once you get into the habit of tracking your spending and planning what you want your money to do for you, it will take you less than 5 minutes every day.
This might be the time where you are trying to find a way to distract yourself or come up with a reason why you can skip this step. Please don’t. We are not going to create a budget; we are going to create a plan.
Why? Because a budget is a hypothesis of where your money might go. A budget is a document that lives somewhere in your desktop folder that you do not see. A plan is something you use every day, every week, every time you are making a financial decision. A plan is what gets you from point A to point B.
Let’s do it!
Step 1: Determine your cash on hand and your expected income
How much cash do you currently have to work with? This is where your plan begins. It begins with the amount of cash you have right now to pay your expenses until you get paid again. Your future projection is based on the amount of money you are expecting to be paid. For some of us, this is easy — we have a consistent paycheck. We can simply write down the amount of our take home pay on the calendar. Maybe your pay is inconsistent; if that is the case use the number, you can count on. This allows you to create a plan you can act on versus a hypothetical plan.
Step 2: Write down what you need to pay with your cash on hand
After you write down the items, you need to pay, schedule those payments right away. This gets the money out of sight and you will not find other uses for those dollars. You are planning your money so it is working for you.
Step 3: Set aside money for groceries, incidentals, etc.
This can be the hard. Do it anyway. Create your parameters and then track your spending to make sure you are staying within these parameters. You may be thinking, I don’t know where to start. What is realistic? If you are not sure this is where you can review your current spending habits to get an idea of your spending.
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