Money Saving Series I - Knowing Where It Is Going

This has happened to most of us - the month passes by and suddenly we ask ourselves “Where did all the money go ?”. Did you ever face a time when you asked yourself - “Oh! How could we spend so much ?” Yes, it happens to all of us and today, I will share with you a simple tool that I personally use to optimize my finances.

There are only two things that we essentially do with our money - earn and spend. And the art of making the most of our money is multifaceted. Not only do we need to increase our earnings and reduce expenses, but we must also invest all the remaining money properly so as to get the most of it. In this series, I will share some ridiculously simple techniques that will definitely help you get more out of your money.

Increasing earnings and reducing expenses - this is what we will talk about now. Fred owns a restaurant and from his earnings from his sales, he invests in blue chip shares. He also saves a lot of money in his bank account. Fred also has a website for his restaurant, from where he fetches online orders for home delivery services. So Fred earns money from :

  • Restaurant Sales
  • Website Sales
  • Dividends from shares
  • Bank Interest

His brother gifted him some money on his birthday, which is also income, but we will ignore it for the time being since that is not a regular source.

One day, his accountant sends him a chart like this :

And Fred immediately realizes that or the last 11 months, his sales have been dropping !! He also found that October 2011 and October 2012 have been great when both physical and online sales soared but 2013 hasn't been as good. So he knows that October is a good time to sell and he can now prepare for this October, so that he makes the most of the season.

Fred thanks his accountant and the accountant immediately tells him that he can drill down to daily data as well and trends can be analysed to as much detail as required.

What if you too had a tool like this ? Where you could virtually see where your money comes from, when it comes, how frequently it comes and so on - so that you can possibly tune the conditions in order to make more money flow in. And imagine a table like the one below for your expenses.

And a chart like this one !!

You are immediately told by the chart that electricity expenses have been increasing for the last 4 years and hence you must switch to renewable sources of energy to save on these costs !! And the possibilities of data interpretation are endless.

This is the power of visibility. It makes us aware of things that we already know but are not aware of. To have a clear vision of where your money is going, and where it is coming from empowers you with clarity of purpose - you can optimize money flow, i.e. make improvements so as to increase your net worth, day in and day out. 
  • Where can I cut expenditure ?
  • Where am I wasting money ?
  • How much did I spend on food in the last 5 years ?
  • Which are my highest earning areas ?
  • What is my average annual fuel expense ? Should I switch to public transport ?
  • How much taxes have I been paying ? Should I think of tax saving investments ?
Questions like these and many more can be answered in a flick; if and only if you have a  tool at your disposal that analyses this data for you. This is definitely the very first step to managing your money better.

At MoneyPlanters, we have developed such a workbook, which does exactly what we have described here.  What you will need to do is set it up for one time which is as easy as anything and then record your transactions daily. With a tutorial that comes along with the purchase, you will see how you can get all your questions answered in a few clicks. To get your copy, Contact Us Now.

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