Sunday 7 December 2014

Your money - Do you know where it goes?

Hello everyone, do you actually know where you spend your money? For me it usually went this way: I withdrew money whenever I needed it, mostly paid by card and once every half a year I had a look into my bank account whether some money was left. Now and then, I paid a few bills. Well, and that was about it. I wasn't really concerned about my money.

We have a financial advisor and various forms of insurance but I only worried about them once a year, when filling out my tax return. And then I always tried to remember for which insurance I was paying what money.


But now that I turned from living a life as an employee to leading the life of an entrepreneur :-), I discovered: it actually makes sense to know about my finances. Because I have no idea how much money I need to earn for us to lead a relaxed life and I do not have any clue what our financial situation really is. Obviously so far we had enough money that we didn't have to worry about it. But we most likely wasted money, too. And who wastes money wastes ressources as well.

I certainly noticed that money and finances isn't the boring subject I used to think. It's fun! Hard to believe.

I want to get back in control of my finances. If you are in the same situation I invite you to participate. I plan to do the following:

1. Today I went through our bank statements of the year 2014, broke them down in a simple spreadsheet and compared them to our revenue. Very interesting!

2. I immediately canceled a few meaningless contracts: magazines, gym etc.

3. Based on income and expenses I create a monthly budget as follows: 60% of net revenues for fixed monthly costs (rent, phone, insurance, car, kindergarten, school, etc.), 10% pension (Riester, etc.), 10% long-term savings, 10% short-term savings for emergencies and 10% to squander.

4. Starting today, I'll comprehend my expenses carefully. I'll note every expense that I make in the supermarket or the bakery and note them down on my mobile phone and later transfer them to my spreadsheet.

5. Do you already know the envelope trick? I got it from Leo Babauta, author of Zen Habits. You withdraw money from the cash machine at the beginning of a month for certain categories like food, gas (if you have a car), everyday purchases (drugstore, gifts etc.) and put it in a marked envelope. Whenever you need to pay anything you take it cash from your envelopes. This way you have control over your spending habits.

6. In order to use the envelope system, I won't use any card for shopping anymore.

7. Once every week I'll enter what I've spent cash and online into my spreadsheet and check where I stand financially.

Until the end of next year I want to have complete control over my finances, meaning having an overview of how we spend our money as a family and how much we have to plan for food and everyday expenses...

What about you? Do you know what your money does? Or do you just let it flow like I used to do?

Photo credit: Taxcredit via flickr, Lizenz: CC

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