Indeed, why?
Simple answer is to become wealthier… More detailed answer is when you do not pay enough attention to your account balance and spending habits, it results in poor management and planning of your personal finances, that in turn causes excessive spending that eats into your savings. All this diminishes your wealth.
Think of a business that skips on planning and income/costs controls. How long do you think such an organization would last? Not for long. There is a definite similarity between businesses and individuals – those who track, manage, plan and control their own finances tend to prosper, while the careless with the money usually go down.
So, why not consider yourself a “business” and start acting like one. You have “revenue” (your income) and “costs” (what you spend to sustain your everyday life), and the goal is to increase “profit” (the remains of the former once you spend the latter). If you “profit” is positive month over month you’re getting richer. It’s that simple…
Of course, the reality is usually more complicated, and often it’s too hard to track and plan ahead the spendings. It takes time, it’s frustratingly boring, and requires too much effort and constant discipline to collect all invoices and receipts, transfer information from them to some software, application or a spreadsheet, analyse all that collected data and try to forecast and plan for the next month, drawing a list and amounts of items to be purchased or pay for.
You might think that tracking and planning each item that has been or will be bought makes no sense as it brings no value. In reality, it’s quite the opposite – more systematic and detailed information brings more accurate and predictable outcomes. Can you imagine a Walmart supplier who’s planning to deliver not a specific quantity of items but just their cost in dollars? Will it work? Don’t think so… Same is with your personal planning – you need to know exactly(!!!) what you’ll need to buy next month (week, year, etc.), how much it will cost you, and think of less costly alternatives that provide the same level of service or functionality. Following that rule, you’ll get clear and predictable spending map which, when compared with your income (this you normally can estimate in advance), provides you with your “profit”, which you can spend, put aside or invest.
Be wealthier!
Your WealthLab Team
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