Series: Assess your current financial situation
Last month, we focused on formulating a financial vision and identifying your financial goals to equip you to achieve financial freedom.
Now that you have a clear financial vision and goals, let’s design a plan to achieve them.
Have you ever wondered where your money goes each month? If you are still wondering, let us resolve that by evaluating your current financial condition. We will explore the following:
- How much money do you earn (Net Income)
- How much money do you spend (Expenses)
- How much do you own (Assets)
- How much do you owe (Liabilities)
A practical yet valuable exercise you should do is to track your income and expenses for the next three months. A simple way to track is to record income as you receive it and expenses on a weekly basis. Choose a tool and process that works best for you. This can be done by using an excel spreadsheet, a notebook or an online budgeting tool. Some banks are already tracking your expenses and providing you with this information. Check your bank’s online tool for this information.
Here is an example of how tracking your income and expenses may look:
Some people might classify this part of our process as cumbersome, however, tracking your income and expenses is essential for creating a sustainable plan with a strong financial foundation.
After evaluating your current financial position, you may arrive at different conclusions, some of which may surprise you. You may conclude that you spend more than you make. You may determine that you are not making enough to meet your needs or that you are currently living within your means. Regardless of your evaluation, remember this tool simply provides a snapshot of your current situation and gives you an idea of your current financial foundation. Your current situation does not determine your future. Your income and expenses can ultimately be adjusted to meet your future financial vision and goals. Remember this is a journey… not a sprint. “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty (Proverbs 21:5).
Let us continue our journey. We are on our way to attaining financial freedom one step at a time.
Do this for next time:
Reflect on these questions:
Do you make enough money?
How can you make more money?
Are you spending too much?
What are you currently spending too much on?
READ MORE: Dream about financial freedom