Financial awareness forms the foundation of any personal finance system. It empowers you to make informed choices, preventing you from falling into debt or facing financial troubles. You might think that becoming financially aware is challenging or time-consuming, but it doesn’t have to be. In just 30 days, you can establish a solid starting point.
To begin, start tracking your income and expenses. You can easily do this by jotting them down on your phone or carrying a pen and paper with you. Whenever you make a purchase, simply write it down and optionally categorize it. It only takes a few seconds each time you track. At the end of the 30-day period, review your spending and income, and categorize each transaction. If you prefer using apps like YNAB or Every Dollar, you can categorize your expenses as you go and even see running totals.
Once you have a clear understanding of your spending habits, you can take steps to adjust where your money goes. Are you subscribed to too many services? Are you spending your paycheck before your 6-month insurance bill is due? Are you neglecting to save for retirement? This is where creating a budget comes in.
Using the information you’ve gathered, start building a budget. Remember, a budget is about deciding how you want to spend your money, not about restricting your fun. You can refer to the Eisenhower Matrix as a helpful tool for prioritizing your budget. While planning, pay close attention to your recurring expenses and ensure you allocate enough funds for them.
After a few months, you’ll have a clearer picture of where your money is going. Take note of any recurring expenses and evaluate if they align with your goals and plans.
It’s also a good idea to include categories in your budget for long-term expenses such as housing, health, and car maintenance, which includes brakes, tires, alignment, and oil changes.
Remember, awareness is valuable in various aspects of life, whether you’re driving, walking down the street, or spending time with loved ones.