Money Actions, the first level...

If there's one thing that needs to be done, it is to record your money actions!

This is different than just saying "make a budget" or "look at your monthly statements" and self judge how you live. Chances are you didn't go paperless because you didn't want the junk mail, but that's a tactic your bank uses to keep you away from your spending habits. It also saves them thousands of dollars on their end - to save paper and postage. They didn't do it for the environment, they did it to tighten up margins. Unfortunately, in the end, you're the one who gets squeezed.

But beyond that, your money actions determines your spending and income. When I refer to money actions, I refer to anything you do with your money.

Money actions are what you do in any interval - a day, a week, a month, even a year or decades on what you do with your money. It is the umbrella that covers all that you do with money and the outcome you make with it.

Keep in mind, money is a tool. Have you sharpened it to make precise decisions? Have you dulled it with wasteful spending?

So how do you record your money actions?

First, you can do the most simple and boring process of making a monthly budget. Use a spreadsheet or index card and write down a list of ALL the things you spend your money on for thirty days. This list can definitely strike hard against one's ego, but maintain focus and be honest with oneself.


Second, estimate and round to the HIGHEST amount of each item you have listed. Mark that amount next to your listed item. For example, let's assume your electric bill is between $37 and $42 - round the amount to $42 and list it next to the bill. This will allow you to estimate without having to worry that you are under budget or over budget. Usually you'll be over budget, giving you wiggle room and additional spending money, which is a plus.
Third, go down the list and mark each item with one of three letters: "E" for essential - something that is so dire you cannot live without. "L" for luxury - something you don't necessarily need but like to have for peace of mind. "P" for product - something that you're putting your money to, like investments, savings, emergency fund, vacation, or gift giving.

Fourth, add up all the amounted items in the list and write it at the bottom. This is what you SPEND your money on.
Fifth, list all your income - this is all the money you MAKE in one month. Make sure it's the actual amount that is on your check - which we call net income, not what your check statement says before your benefits and taxes - that is called gross income. If you have two jobs, write down both the check amounts. If you occasionally get a check from grandma, DON'T write down that amount. The amounts you're writing down is your consistent income - income that is always going to come to you. Unfortunately grandma may or may not give you a consistent check so you can't use that to help you identify your true money actions.


Sixth, subtract your spending amount from your income amount. If the number is positive, you're in the positive and you're doing fine. If the number is negative, you need to take action. If you're positive, even by a small amount, your budget is sound and you're living a decent life without money issues. If you're in the negative, your actions are to go back to your spending list and determine which items must go or be reduced. The problem is during this process many people underestimate, overestimate or simply fib on their money actions. Remember, if you are to lie to oneself, then you only harm oneself - so what is the point of the lie?

IF YOU ARE:

In the positive, then you can move over to Money Actions, level 2 - which is customizing your money to work for you.

In the negative, then you have to go back to your spending list and determine which luxury items you have to let go. Also look at items you can reduce your spending, like taking shorter showers, cooking and meal prepping, changing cell phone services or discontinuing luxury services. Personally I've gone three years without wifi and I'm happy to say I've saved almost a thousand dollars every year. Not to mention that thousand is put into investments, products that I'm building for my future.

So how did I get to all this information? I talked to my good friend and financial mentor, Bart. He mentioned this book a few years ago named Your Money or Your Life by Joe Dominguez and Vicki Robin. To me it was a little outdated but it does dive deep into budgeting and shows you a practical way of how your money is a tool and how you can use it to your advantage. It even breaks it down to how much you're worth on an hourly rate, which I found both fascinating and scary.

Unlike Babylon, Your Money or Your Life isn't a collection of fables. The book is peppered with real-life stories of people and their spending struggles. To get through the book quicker, you can skip them over to get into the meat and potatoes. If you're serious about focusing on budgets and spending habits, I recommend the book - but use it only as a guiding reference. The real action is going to come from your own money actions. Below is my actual book copy:
 

If you have any questions, please contact me.

Adam
snailderail@gmail.com

Monetized link to the book (or find it in your local bookstore):
Your Money or Your Life by Joe Dominguez and Vicki Robin - this is the 2018 updated book.

Disclaimer: I am not a financial advisor. I have no proper training in finance or consider myself an expert in money and finance. This blog is just my personal journey in gaining control of my money, my life and sanity. I don't expect you to get rich but I hope you will turn out successful with your finance management. I hope these tools, tips and strategies helps someone out there as much as they have helped me. Please contact me for any concerns. - Adam

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