If you want to get rich, start by tracking your personal finances.
If you are in a marriage where one person handles the finances, it makes sense to prepare a monthly budget and net worth statement to provide them to the other spouse. This will keep both of you informed and motivated to work together to achieve the same goals.
If you are single, it will be easier to get your finances on track because you are in full control. Get your money right before combining finances with a spouse.
It’s amazing how many people live their day to day life on “bank account budgeting.“ This form of budgeting is where you adjust based on what’s in the bank. There is little thought about where one’s money goes, nor is there planning for the future.
Tracking your budget, lets you know how much you are saving, set goals, and forecast into the future.
A budget is composed of 3 things:
- Side hustle income
- Benefits earned (i.e. 401k & HSA employer contributions)
- Interest and dividends
- Credit card rewards
- Retail shopping
- Health and fitness
- Professional and bank fees
- Net Income (Income – Expenses)
Tracking your income allows you to set income goals. Focus on year over year growth.
Tracking your expenses allows you to see where you spend. Spend intentionally.
If you are still trying to get wealthy, your net income should be positive every year.
Track your savings rate, which is Net Income / Income. Mr. Money Mustache, explains the math behind how important savings rate is. As a simple guide, here is how many years you need to save to have sufficient money to “retire.”
Get to 20% as quickly as possible. Then work on increasing that percentage every year. You can increase your income or decrease your expenses, or both!
If you want to be wealthy, you need to start with the basics. Start a monthly budget. There are many tools out there to help you do this, I use Quicken.
If you have questions or need help to get started, reach out to me.
- Track Your Monthly Budget