Now you know you net worth. The next step is to find out how much money you earn and where are the black holes that make your money disappear every month.
My advice and I will repeat this phrase forever is: “You need to be a control freak”
Every cent that you spend needs to be registered!
But we will start with our month income worksheet. (again, that is the easy part)
Income
Salary
Rental income
Investment income
Back account income
Alimony
Social security
Other(s)
Total income
Now is the hardest step ever! You need to register all your expenses.
You should build a huge worksheet with 31 columns and note every cent spend in the proper column (a day column in the right line that indicates the type of expense)
Expenses Day 1, Day 2, Day 3 …. Day 31
Rent
Mortgage
Electricity
Gas
Water
Garbage
Sewer
Food
Clothing
Personal Care
Auto repairs
Auto fuel
Doctor
Dental
Eye care
Drugs
Other Medical Expenses
Auto insurance
Health insurance
Home insurance
Life insurance
Disability insurance
Other insurance
Vacation and travel
Dining out
Entertainment
Child care
Child support
Donations
Education
Hobbies
Dues
Newspaper
Books
Subscriptions
Pets
Allowances
Bank investments
Mutual funds investments
Brokerage investments
IRA or pension
Other
Total
Be honest with you and follow my advice: I need to be a control freak! I need to know where my money is going out…
After a full month cycle, you will have a complete worksheet with all of your expenses.
Now you will calculate the most important equation of your life:
This is me = Incoming – expenses
If you are spending more money that you earn, obviously it is the main problem, but this is only the begin of your financial journey.
From now on, you should put in this worksheet every cent spent.
Remember, you need to be a control freak!