1. If you don’t know the problem, you can’t find the solution.

Imagine…

You are playing a football match. But nobody is tracking the goals. How can you know who is winning?

Or you are going to the doctor and when the doctor asks you “what’s wrong?”, you can’t tell whether it is your head, your stomach or your leg hurting? That will be harder for the doctor to find how to cure you.

If you don’t know the problem, you can’t find the solution. This is the same with money: you are probably reading these lines because you want to learn to manage your money better? The first step to improve how you manage money… is to find out what you do with your money. How could you repair something if you don’t know what’s broken? 

So first step: note down everything you do with money – even the little expenses (they add up!). All the ins, all the outs.

Find a system which works for you– an app, a note on your phone, on a notebook, on a spreadsheet, on a day by day basis… whatever you feel you can stick to. Find the right level of details: example: food, clothes, transportation… or if you want to detail food more, split it between market and restaurant for example. It depends on your spending pattern. Whatever is easy and significant.

Then at the end of the week add up all the same expenses (food, etc…). Ideally if you earn a monthly salary do it for one month so that you have a clear picture of what you did with your salary.

Imagine… if you invest in a big company and they are not able to tell you what they spend and whether they make a profit, would you trust them? Noting down is the NUMBER 1 thing to do to manage money and trust yourself. What most people say when they start noting down is “it’s an eye opener”, “I didn’t realise I spend so much on this”.  Remember: If you don’t know the problem, you can’t find the solution.

Let’s put this into practice

Here are some ideas on how you can note down your incomes and expenses.

• Notebook: you can write each ins and outs (especially if you mainly use cash) one after the other and see how much you have left day after day.
• Spreadsheet: write your ins and outs in a spreadsheet. This is easier to sum up your expenses on a weekly or monthly basis.
• Computer: either note down directly in an Excel spreadsheet or keep receipts and/or your notebook and type it in a spreadsheet (see example below) or in a personal finance software (especially if you have several bank accounts, investments…).
• App: there are many apps around where you can type your ins and outs and also help you budget (we’ll see that later).
• Bank statements: check them and download them.
• Double check: your notes and calculation must equal the amount of physical cash you have. So count your cash! For example: You start the day with 100 in your wallet, spend 40, so by difference you have 60 left. Count your cash: if you have 58… then you must have forgotten to note down an expense. If you have 61, maybe you got the calculation wrong, or there was an error in giving you the change back. Write the difference (as “difference”) in your notebook so that your tracking is always equal to your physical cash.

What is important is a tool that is easy for you to use so that you really track everything… every day, month after month… all year long!