Where is Your Money Going?

 I was having a conversation with a young lady who shared that she was living paycheck to paycheck but didn't understand why. I suggested she create a budget to see exactly where her money was going.  She said she didn't need a budget as her expenses hadn't changed, but she just didn't have enough money. I get that, but a budget could still be helpful.

For a long time, I did the math in my head. I knew what I made and what my typical expenses were. Looking back, that was silly; the truth is, having it in your head is not the same as having it in some visual or written format. It really is an eye-opener once you visualize where your money is going. You may be surprised by the results. 

You can only spend 100% of what you have.

A pie chart is a great way to visualize income and expenses. It allows you to see how much of the pie (income💰) goes to each of your expense categories. This can help you better manage your finances. 

% of Income Spent

Say you take home $3000 a month, and you pay $1000 for rent/mortgage.  $1000/$3000 is .33, meaning that 33% of your income is going towards rent. You'd do this for each of your monthly expenses to see the full breakdown. 

This exercise can help you see where your money is going on paper (or screen💻) and then help you plan around it. Realizing that you're maybe spending more in one category than you thought may present an opportunity. Some expenses are not easy to decrease, but if you're spending too much on miscellaneous things like travel, entertainment and restaurants, you may decide to cut back. If you're spending too much on credit cards, you may figure out a plan to pay those balances off in full as quickly as possible to get rid of that expense (and all the interest you're probably paying👀) altogether. 

Every budget/situation is unique; however, when you step back and really dig into your spending and saving habits, you may realize that there is room for improvement and ways to quickly take action and improve your financial situation.  You may want to find ways to decrease spending or increase savings and the pie chart could help you set targets and track your progress. 

Managing Money Like a Boss means sometimes doing what others won't do. Visualizing your income and expenses can help you better understand where your money is going and give you more control over your financial situation.