We often find ourselves muddled when it comes to finances. Another year goes past and no matter what we try we end up in the situation… absolute chaos.
Understand what you currently have
However, when looking to get back on track with your finances you first need to understand what you currently have. Do you have a personal checking account? A business account? Or both?
I recommend making use of both, this way you’re able to greater manage your finances with incoming and expenses becoming much simpler to understand rather than coming out of a single account with everything being intertwined.
Income vs. Expenses
This really is the heart of finance, if you want to understand and keep track of your money, you’re going to want to monitor your income and your expenses. It really is that simple.
For example, how do you actually make money? Do you get paid a paycheck? Do you have a side hustle? Do you have any investments or other incomes to your account? Acknowledging and understanding these allows you to assess your current situation, helping to draw a greater overall picture of your current financial situation.
However, there’s one tip, in particular, many don’t follow. You see, whether you’re paid on a salary or by the hour you’re also paying further expenses, think taxes and insurance. So, while you may receive $2,000 per month salary, you may actually only be receiving $1,500 once all other expenses are subtracted.
Understanding where your money is going and accounting for this will inevitably help to work towards your goal of getting your finances back on track.
Furthermore, you need to look at the majority of your expenses and where these are going. You’ll pay rent, bills, weekly groceries, and gas as basics, however, how much are you actually spending and are you buying luxuries you simply don’t need way too often?
I suggest making use of an expense tracking app such as YNAB, this breaks down your expenses and helps get your head around exactly where your money is going.
Taxes & Other
If you run a business, you pay taxes. That’s a common fact. However, how often are you keeping track of these? Generally, many entrepreneurs leave taxes to the last minute and not only stress more but are more likely to make mistakes. Instead, we recommend keeping track up to four times a year, whether this is with an old-fashioned folder to store invoices and receipts, or whether you’ve got your very own accountant.
What if you run a business?
If you run a business you should not only have two accounts, but you should also treat each account as if it were its own. This allows no overlap and confusion between personal finances and business expenses while ultimately crafting together a bigger picture of where your finance currently stands.
So, are you currently on track with your finances? Let me know below!