If life is just a sequence of events, then money just a matter of earning more then you spent.
What seems like a very easy equation, is in fact just that, a very easy equation.
Your money + Earnings – Expenses = Your new money
Do you keep track of your money? I bet you know precisely how much money you earn! But the question is, do you know how much money you spend? And I am not talking about a round about guess into the darkness. I’m talking serious numbers here. How much money do you spend on your nutrition, cloths, your car, your apartment, your holidays or your future?
In case you can not answer these questions right now, I can highly recommend you to change this today. If you have no clue about your financial life, how do you think will you change that in the future? This is the start for everything. You need to get these numbers! You need to know precisely how much money you earn and how much money you spend.
Well, some of you will laugh about that. Why are you so serious about that topic? Relax! Chill out! There is always more coming in then going out. So, nothing to worry about, right?
Oh really? I see that in a different light. It doesn’t matter if you have 5.000€, 50.000€, 500.000€, 5.000.000€ or 5.000.000.000€, the equation is still the same. And if you think that once you are rich, you can invest more time on that, but not today with that little you have, then you are on the wrong path my friend. Having money starts in your head. It is a decision you take, not your faith or destiny. It demands from you to take action. Make compromises and cutbacks and plan your financial future.
The difference between managing 50.000€ or 5.000.000€ is only existing in your imagination, but not in reality. If you have a look into books like “The millionaire next door”, you will easily understand that. It is always a matter of knowing your expanses by hearth and take the right decisions to move in the direction you want to move.
Ok, ok, I got it. But how do I do that?
Well, when it comes to that, the sky is the limit. From fancy online tools, to a piece of paper and a pencil. What ever you want to use, the right product will be out there. But if you are asking me, I would recommend you to work with an excel sheet.
How to start
- Get an overview about your financial status
- Document your spendings and earnings
- Analyze the data on a monthly basis
Get an overview about your financial status
Make a list and document all the money you have. Tip: Working with categories helps a lot to make the whole thing easier. You can go for the money you have in the bank, the money that is invested somewhere, and so on. Why should you do that? Believe me or not, but it is rather difficult to stay on top of everything. You will have multiple accounts, investments, and what ever else there is, so, you want to have all those figures in order to know exactly where you are currently standing. And to be honest, there is nothing that motivates you more, then seeing the current financial net worth you have and how it grows.
Document your spendings and earnings
This will be the main job you will need to focus on during the year. Every time you buy something or spend some money, you will need to document that. If you want to write it down, or document it online. It is all up to you. This is just a list, that will contain all the spendings and earnings your have.
Analyze the data on a monthly basis
Last but not least, we want to do the analysis. Now, the expanses you had are getting categorized and presented in such a way, that you can easily figure out how much money you spend on what. This will help you to find out if there is a potential for you to either decrease your expanses in certain sectors or if you can actually afford the life you are currently living.
Next on the agenda, you can then start to work with the equation, increasing your wealth by making sacrifices or increase your earnings. Taking the right long therm decisions are the key to success. But this is a story for another time.
I hope this will help you to get a first overview about your financial situation, if you haven’t one already. If you have any questions or want to share your knowledge, give us advise, feedback or what ever, feel free to contact me at any time, or leave a comment down below.
See you next time!
Engineer, Motorsport Enthusiast, becoming an Entrepreneur, Author and just different