This economy is tough, and to stay on top of things financially the most important thing you can do is to control your spending. As we’ve seen many companies in the near past tumble, a lot of it has to do with overspending and not controlling the outflow of monies. This article will teach you the 3 things you need to do to control your spending, and thus take control of your financial life. We will talk about the first step in depth.
Here is an easy way to remember the 3 important steps: the RTFs of spending. RTF, RTF, RTF, commit that to memory. They are:
Review your spendingTrack your spendingForecast your spending
To make it easier, RaTiFy your spending, to remember the RTFs of spending. Let’s look at the first step, reviewing your spending. In order to know where you want to go, you have to know where you’ve been. What does that mean financially? In order to get to financial independence (health) and a solid, self-funded retirement, you have to have an accurate and realistic picture of your current and past spending patterns. Here’s how you do it: you need to look back for a 12 month period and categorize your spending.
This sounds like a difficult task for most because tracking your spending feels cumbersome, sometimes overwhelming. However, this step is so important, so don’t give up on it! Go back through checkbooks, credit card statements and any tracking software and categorize your spending into your personalized spending categories (they will be different for everyone; some have young kids with diapers, others don’t, etc.). Once you have done this and have your yearly spending into categories, divide each category by 12 and you have your monthly spending! This is matter of fact, not something you “think” or “feel” about your spending, it is reality.
Some of you will say there is no way for you to do that because you haven’t tracked anything, you don’t want to or have another excuse. The fact is, every successful company does this and you need to treat your personal finances like a successful company to be successful yourself. So, if you can’t do 12 months do 6 months; if you can’t do 6 months, do 3 months; if you can’t do 3 months, you are not serious about your financial situation and you need to assess your emotions on this, and then change your mind to decide to get serious!
We have hit the “R” in the RTF of spending; next week we’ll talk about the “T”, tracking your spending!