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A Small Leak Will Sink a Big Ship: Creating a Basic Budget Flow

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There’s something that all financially successful individuals do; it’s not technologically advanced or only for the ultra-rich. It sounds simple, yet most people don’t do it. And it’s this:

Control the flow of money.

Sure, there are other names for it, like budgeting or creating a spending plan, but “controlling the flow of money” describes it exactly as it is. It’s not only understanding what money is coming in, it’s having full knowledge of where it’s going on the way out.

Every household, individual, and business is faced with the same set of basic constraints: A certain amount of money comes in, there are expenses, and a certain amount of money is left over at the end of the period (or not). Pretty basic. Money comes in and we make decisions about how to utilize it.

So why does it seem so hard to get a handle on it? One of the most common things I hear is, “We make decent money, but I don’t know where it goes. It’s just gone.”

That’s a problem, because it means that the opportunity to direct money to where it can serve you best is being lost. It means there’s a leak in the pipe somewhere. As Benjamin Franklin said, “Beware of little expenses. A small leak will sink a great ship.”

How can you fix the leak?

Get back to the basics. And do it YOUR way. There are many approaches to understanding where money goes. You should choose one that works for you and your skill set. If you prefer pen and paper, start there. If you like Excel, open a new spreadsheet. If you prefer using more advanced technology, there are tons of free options, many of which allow you to link your bank accounts, credit cards, and other financial lines to gain a full picture of day-to-day finances.

For some of us, the physical act of writing things out on paper is an excellent place to start. We can touch it and see it, and that makes it real. On the Wisdom Wealth Strategies website, we offer a fill-able PDF that makes the exercise easier. Here are the steps to follow:

Start by determining your take-home pay each month (or annually, if it’s easier). That’s what comes in. A great tool is the last paystub of the prior year. It tells you exactly what your take-home income was (also known as net income).

Make a list of every expense that occurs each month. Check your bank statements and your credit card statements.

  • Get into the nitty-gritty and include items as low as $10 monthly.
  • Be really honest. This work is for you and for your future.
  • Involve your partner or spouse in the process. You both need to understand the process and agree on the best use of your household finances.
  • Are you surprised by what you spend? Are you surprised by where you spend? Most people are.

Now that you have all the information, you can utilize it to make decisions based on your needs, your goals, and your values. You can change your spending decisions and your savings decisions because you have the power of knowledge. You can control the flow of money and ensure that it is utilized to your greatest advantage.

Creating this basic budget flow will help you control your money, rather than the other way around. Knowing where each dollar goes will allow you even more opportunities to reach your goals – whether it’s a vacation next year or more contributions to your retirement account. By going back to the basics with your budget, you’ll be molding the building blocks for a better financial future.



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Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.

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