Have you wondered “I’ve been working for nearly a decade or more now. How is it that my Zero Balance Salary account is stuck forever at that ‘Zero Balance'”
“I started my career with a salary close to what my dad retired with, and in spite of all the generous increments and all these years of hard work I’ll probably own nothing more than what he did when he retired and to top it all I don’t even have a pension”
It’s all too easy to say ‘It’s the inflation, it’s the interest rates, its the falling industrial output, oil prices, direct taxes, indirect taxes, Cess and a numerous other things we have absolutely no control over’. You may not be entirely wrong, but we have already seen in ‘Circles of Life’ that it is not a fruitful exercise. We should only focus on things we have control over.
If you are a doctor or an Engineer you probably openly admit you don’t understand money and the options are too confusing, so you would choose to do nothing. Unfortunately, even chartered and cost accountants (like me), make too much analysis and too less action on their own personal finances.
Why you need a Personal Finance Plan?
Everyone who deals with money needs a ‘Finance Plan’ . After all, neither a petty shop nor a recently funded startup , or even a Fortune 500 company would spend any money without keeping records for the same. Why should you ?
Hari wrote about how recording his expenses enabled him to take the plunge into his own independent practice and since then, we have had several requests on further details to follow through to the plan. So, in this post and in the series following I am going to help you set up a ‘Personal Finance Plan’, to enable you to have better control of your Finance and thereby pursue whatever is most important to you in your life.
Your First Step to your Financial Freedom Time Required: 1 hour/month
Budgeting is one of the many things, we all know we have to do, but never end up doing. Even as a Finance Professional, it’s not my favorite thing to do. That’s why we made no expenses plan or budget, all that we did was just record expenses at the end of the day. Every day it took us less than 2 mins, and at the start of the month and end of the month, to adjust formulas and reconcile, it would take us under 10 mins. That’s it, in about 1 hour/month you can be on your way to understanding your spending pattern.
‘Track your Money’ Apps:
I tried a few ‘apps’ to be able to recommend to you. Each app has a different user in mind and if you are the ideal user, it may fit you to the T.
Andro Money: This is very much like the expense tracker sheet, has an auto reminder to remind you to enter expenses, split expenses, relevant categories and sub-categories that can sometimes be overwhelming for the uninitiated. If you are meticulous and would love to have your expense book handy at all times,do try this out.
Money View: This app reads all you Bank SMS and records your expenses and bank account balances automatically. There is also option to add manual transactions. Gives you reminders to pay your credit card bill on time and ensures you don’t accumulate those devilish late payment charges.
We still stick to our excel sheet in google drive as it can be entered by either of us and gives us the flexibility to make any further analysis and add remarks as required. But having all your bank balances at one view is a great way to be able to manage your cash flow, so do use a combination of solution as it suits you.
Measure and Manage:
Management Guru Peter Drucker said ‘What gets measured, gets managed’
So to manage your money, your first step to Financial Freedom is this totally unsexy thing of recording expenses. Like we had discussed before, success involves many routine unsexy stuff and not highly technical strategical complex things reserved for intellectuals.
Once we know the expenses, it’s easier to know where you can manage it. Once you have the cash flow firmly in place, in the subsequent series of articles, I will talk about building a buffer, savings and investment route to financial freedom. Download the excel or the apps, or note it down in pen and paper. Don’t let technology or financial know how get in the way of action. Start where you are and you will get better over time.
I am keen to know if this is useful to you in organise your finances. Was the excel and the advice here simple enough to start using immediately? Do you think a Personal Finance series is a good idea ? What else in Personal Finance do you have questions about that I can address. Please let me know in the comments.
Downloads: Monthly Cash Flow Tracker.