Regardless of your financial goal, you may not have a clear idea of just where you spend your money. At some point, everyone should have a plan for how to spend our money. We need to control our money, not have it control us.
Managing your money is like many other tasks in your life; it is a difficult chore. But managing your money helps you know if you are spending in ways that will help you reach your dreams or if poor spending habits are preventing you from achieving your dreams. Why do you need a spending plan?
To Prepare For Large Expenses
By taking the time to plan ahead, you can prepare for large financial obligations. By delaying the immediate gratification of buying what you cannot afford and using credit, you can save for those purchases. If you are interested in buying a home, there are expenses associated with the purchase that fall outside of the monthly mortgage payment like down payment, closing costs and moving expenses. Prepare for these in advance by beginning to save for them long before you ever purchase the home. If you have already bought your home, preparing for those future repairs by saving for them allows you to handle emergencies as they come up without incurring more debt.
To Increase Savings
How many of us save money for emergencies? How many of us save money to help pay the monthly mortgage payment if something catastrophic happens? Or if a spouse has a baby and maternity leave is unpaid? There are all sorts of eventualities that can come up and by knowing how you spend your money and what you spend it on, you can create opportunities that will help you to begin saving.
To Prepare For Surprise Expenses
No one can predict the future, or when the transmission in the car is to going to go out on you. No one can know everything that is going to happen so the best plan is to save for emergencies that you identify as your emergency fund.
To Identify Wasteful Spending
Once you begin looking at your spending habits, you may be surprised to discover that fancy coffee you buy once a week on the way to work costs nearly $5.00. If you stop and get one of those every week on the way to work, you have just spent $260 this year on coffee. Coffee that you could have made at home for much less. But sometimes we don’t realize how those small purchases add up until we start tracking our spending and discovering just how much small items can become. Just think, if you stop and get one of those fancy coffees everyday on the way to work, that $260 just became $1,300. Can you imagine other things you would rather spend that $1,300 on?
To Accomplish Goals
If you don’t know where you are you will never get where you want to go. Tracking your spending will allow you to make a road map of where you are and help you to get where you want to go. Your spending plan will become that road map and help you reach your destination.
Terry Ford writes about managing your money and a wide range of other topics. She doesn’t leave home without her trusty grammar checker.
