Where Did All My Money Go? The Truth Behind Income and Expenses

Introduction

Be sincere, when last did you take a sit and calculate your income and expenses?

I’ve had friends who always claim to know how they spend their money and where their money goes. But whenever I ask them “how much did you spend last week? they go blank or just cook up some figures just to sound convincing.

Well, I can’t blame them because even me writing this post, after reading books on how to manage my finance, i still default a lot of the times. But imagine if I had my own business and I operated it without a budget or have any idea about my profit and losses, It would look rather strange. That is exactly what happens when we don’t calculate our net income or analyze our spending habits.

I will be breaking it down, to make it easy to understand

knowing Your Net Income

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Tracking your expenses is not something you wake up from nowhere and start jotting down figures. It is required to know how much money you’re working with.

Formula:
Net Income = Total Income – Total Expenses

Total / gross income: the total money you earn for a month from both salaries, side hustle, stipends from your family.

Total expenses/ deduction: this are taxes, pensions and any expenses you can think of.

Let me put it into more perspective for a clearer understanding.

If your salary is #5000 and your expenses for that month is #3500, the change left, Which is #1500 is your “net income”. That’s what you use to invest or save it.

But what if after all your expenses, you don’t have a cent to your name and to make matters worse, you are still owing on top???

That’s where the next step comes in.

Track Every Expense to the last cent

This is the hard part, seeing where your cash really goes too. Believe me, when I say this step 2 is humbling.

Here’s how to analyze your spending habits.

• Write down to the last cent whatever you spend in a space of one month.
• You can use an app, spreadsheet or a notebook to jot it down.
• Categorize expenses into essentials (such as rent, utilities) and non essential ( such as eating in restaurants, impulse buying, clubbing).

After carrying out this experiment for one month, you will notice you must have spent almost #45,000 eating junk food, #15,000 for online flash sales, #2500 unused subscriptions. All this are examples of money leaking from unexpected places in your pocket without you even noticing it. Shockingly, this expense could account for up to 20% of your net income. Then you will realize that , what you don’t measure, you can’t manage.

Once you have noticed this, is time you ask yourself the hard questions like; can i really do without this stuffs? is there a chance that I can substitute this stuff for something cheaper? etc

Make necessary adjustments

Once you notice those unnecessary expenses, is time to take action and redirect all those money to your savings or investment plan. This doesn’t implies you have to cut off every little joy in your life. You just have to be intentional that’s why I always suggest the 50/30/20 rule.

Be consistent.

Once you have decided to track your expense, you have to be consistent and make it a habit. Picture it, like a fitness exercise plan for your cash. You wouldn’t expect to lose weight by working out just once, would you?

Find out how your performance went for each month, if you stick to your budget and if there’s anything you can improve on.

Conclusion

The fact is managing your money isn’t about how much you earn every month but it is about how much you can keep. So, you just have to pause for a moment, calculate your net income, be consistent in tracking your expenses and make deliberate decisions to take control over your finances because the penny you save today brings you a step closer to your dream story!