Where Did My Money Go?

Its a week after payday and you wanted to go out and have some fun. When you reached for your wallet, you find out that you seem to be missing a lot more than just coins. In fact, your money seems to be very much depleted. You wonder where your salary went.

Well, you must be thinking very hard right now about what happened in the past few days. Most likely, you're thinking that you need a big change but don't know where to begin. Here are some tips in managing your personal finances.

Running low on cash even if payday was just a few days back is not a reason to panic. You just have to devise a foolproof way to manage your cash. And the first thing to do is have a financial checkup.

How much are you worth?

First off, you must know your net worth. By definition, net worth is the difference between your estimated amount of liabilities and assets. This determines your financial health. So how do you determine this? Simply put, you need to write down a list of your personal assets and liabilities. Write your sources of income (assets) in one column and a list of your expenses (liabilities) in another and compare. Are you left with a negative figure after subtracting your expenses from your income?

For a template to work with on your Personal Statement of Assets and Liabilities, click here.     

Now that you know how much you're worth, start tracking your expenses. This is the most effective way to make sure that you live within your means. You might think that this is an unnecessary step, but seeing your splurges or impulsive expenses might surprise you. Seeing them written down will make you realize that you've spent a lot on things you can do without. At the same time, you'llknow what to cut down on and how you can spend less on the things you simply can't do without.

Next, create your budget. First thing to remember: be realistic. View your list of expenditures and work with it, not necessarily against it. You can still treat yourself to a cup of coffee everyday, you can just buy it from a less expensive store. Basically, you must balance self-discipline and realism in this step, since you might start cutting back on the essentials to allow your luxuries.

Debts, debts, and more debts.

You must realize that in order to have a really worry-free financial situation, debts should be either completely abolished or minimized drastically. Most young professionals are deep in debt due to credit cards. Credit cards are really handy, but having one gives you the feeling that you can always rely on it. That's a wrong idea. Use credit cards only in cases of dire emergencies, and that doesn't include losing the opportunity to buy those cute gladiator heels.

The trick is, pay with cash if you can. Paying with credit cards may seem to make life easier, but when billing time rolls around,you'll be surprised that the high interest rates actually adds too much weight to your burden.

The Golden Rule: Live within your means.

If its not necessary, don't buy it. Learn to scrutinize every purchase. This doesn't mean that you have to skimp on everything, just be wise about what you spend your money on. Doing this will ensure that your future will be much brighter and your present less stressed out.