- Collect your Counting book, a pencil and calculator, and sit where you’ll be able to concentrate & groan. (I know, you’re sitting at the computer, but do the best you can so that Part 3 of this mini-series is not too much of a strain.)
- Add all the In column entries to get the Net (after tax) Total Income, even if it’s from several streams with or without up-front tax deductions.
- It would be nice to work with gross figures, but if the tax office has already taken its share, there’s really not much point, for our purposes.
- Estimate Net where necessary, erring on the side of caution.
Which is higher? Income or Outgo?
(I don’t need to tell you which it should be, but whichever it is, defer judgement or assumptions for now, and read on.)
4. Add up each individual category to get its sub-total, and write these in your Counting Book where you can see them all at once, in one column or row.
- If you have too many categories with fiddly amounts in them, combine so you have 10 or fewer.
5. Look at these categories & their totals.
Do the figures seem proportionate to your priorities?
That is, higher for high priorities, minimal for the rest? The funny part about this step is that you won’t even need a calculator to tell you. This is one of those times when gut feeling works fine, up to a point. You’ll resent some expenses just looking at them! Others can make you feel wistful, smug or even chirpy! However, these feelings may change after you do the next bit, so don’t take them too seriously. Humble pie is free, but it tastes like ... well, here’s the next bit:
6. Draw these on a bar graph, like this:
Then all you have to do is this:
A. To live within your means, simply squish the tall orange bar down so it’s lower than the green bar.
- Really, it’s that simple. The discipline for how to do that, and the actual maths involved might be hard, but all you have to do is find a way to spend less in different categories so that Total Outgo becomes less than Total Income.
By the same token, I should probably have called Income something more proactive – Earnings might do, but the focus here is on watching the money flow in and out & seeing where it’s imbalanced (if so).
B. The other way to live within your means, of course, is to whoosh the green bar up above the orange one! Even then, you’ll benefit from reducing unhelpful outgo first, so you’ll have even more money to play with once you find a new or better source of income.
- To nurture your priorities, you’ll have to get a bit more creative with the short orange bars. Look them over.
- Do any show obvious conflicts? Say, too much going out on Entertainment and too little on Health?
- Maybe you can’t reduce the cost of your dwelling – whether rent or mortgage, but perhaps you could bring in a boarder, or consider downsizing, moving out of town...
- When you’ve balanced these out better, can you ethically hold back a small amount from some area and spend it in a new, neglected category, like a forgotten hobby? (There’s that 50c again: Regularly spend directed savings on something that makes you feel increasingly fantastic!)
Hope you find it easier to look at money now!