by elmads

Introduction

Knowing your salary, income and its projections gives you an overview of your financial lifeline, while knowing your net worth is a snapshot of your financial health and stability. Lastly, knowing where your money goes in a strict tracking method will give you a detailed overall view of your cash flows, on how it goes on to your hand and leaves your hand.  

This is not the hardest among the three but this is the most time-consuming category. You know why? Because this demands a strict discipline in your part, the willingness to record all of your transactions in a given day for the rest of your life. Yes, you read it right. This is an endeavour you do for the rest of your life; it may sound impossible to do but I ascertain you that once you get the gist and hang of it, then it would eventually be a normal process of your everyday life.  

There are two ways to record your daily transaction which is either by hand writing or logging it via electronic devices. With hand writing you could use logbooks or any other notebooks that will suit your taste, it actually does not matter what you use as long as you could understand what you write on it. Secondly, is by electronic devices. These are your smart phones, laptops, iPads and desktops. You can use the notes section for each device, or you can access applications. The most popular application that has been used is Excel spreadsheet. To be honest this is the best application that we, financial mutants, could ever use. Once you learn the basics of using the spreadsheet, your financial log will be quicker, easier and more detailed.  

Now then, It is important to start with a simple log of your spending in a day. An average person usually spends daily on transport and food, so be aware of these two categories.

Next are your monthly expenses which are payed in a certain time of the month. It is wise if you could have a routine date of the month to pay for your bills such as electricity, water, rent/mortgages and others.

Afterwards is to total your daily expenses, because you will also make a total of your month’s expenditures. Having a total daily expense log will make your computation of your monthly expenditure easier for you.  Below is an illustration of this method.

Once you have done this consistently and have done it for a year or so. It is time to make an overall view of your monthly to yearly spending. See below photograph. 

MONTHLY VIEW

YEARLY VIEW

I know it still looks overwhelming with all those numbers, so the next step is to make a bar chart in order to give you a broader view of the flow of your cash. 

MONTHLY COLUMN GRAPH VIEW

YEARLY COLUMN GRAPH VIEW

The essence of these bar graphs are to give us a generalized view of the months or years where we spent or saved a lot of money. In particular, maybe we notice that we had a spike of spending in the month of June, we could go then to that specific month and scan all of our spending and look what we bought that time, which caused the spike. Finding it could kick our memory and give the reason why we bought it, was it essential or not? what was our emotion during that time of purchase? and what motivated us to do so? This will aid to give us our historical expenditures and could also assist to change the ways of our spending and saving habits, as we see fit.

Cash flow statement, either in a corporate or individual level is the same. It communicates what we truly treasure and prioritize in our lives. When done rightly and precisely, it will never tell lies. It will show a part of an individual’s true nature.

To sum it up

Budgeting our hard earned-money is a vital step in attaining financial freedom, but if we want to take it one step further and have a complete strategy in managing our money, then this process is a great opportunity for us. Learning in the most disciplined and consistent way makes this method efficient in all its level, as it gives us the sense of achievement and fulfilment. As former US president Franklin D. Roosevelt quoted.

“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.”

Franklin D. Roosevelt

Knowledge is my Sword and Patience is my Shield,

Evan Louise Madriñan / elmads

<—Financial Mutant Level of Managing Money – Your Own Net Worth

This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.