Do you want to do one thing that will change your financial success more than anything else? Track your money. When you become intimate with your numbers, you’ll be able to plan and make projections and generally manipulate your money. This is the dream of every entrepreneur I know.
And yet when I ask them if they track their numbers they look at me sheepishly and say no. Do you know what successful businesses do? They know their numbers!
Think of tracking money like using a map. You need to know three things: 1, where you are, 2, where you’re going and 3, how to get there. Tracking your money is the beginning of “where you are.”
We’ll cover the other two later, don’t worry! But the truth of it is, that it’s impossible to figure out where you’re going on a map if you don’t know where you are. You get lost and turned around and likely won’t make it at all. (Do you remember as a kid standing the mall looking at a map trying to find the damn bathroom? Working with money sometimes feels a lot like that!)
Tracking your money is one of the habits that my clients say is hardest! It’s also one of the most critical and feels the best when you’re caught up! You don’t have to learn a new program (though you can) and you don’t have to track every account (though I recommend it) but you do have to do one thing: get started!
Start where you are. What I don’t want you to do is go back and do a whole year’s worth of money tracking all at once – it’s too much. You’ll get overwhelmed and quit. Or you’ll do it for a week and give up. So just start with today, right now. Open a spreadsheet or pick up a pencil and paper and write down what you spent today.
If you’re feeling really ambitious, start with the beginning of this month. But take 5 minutes and get started.
Just put today’s transactions in every night or every morning (or sometime during the day when you’re doing your Prosperity habits). I find that if I try for every night, I get them in about 3-4 times a week and that keeps me nicely on track with no big spikes in activity. It also keeps my financial fears under control and tells me exactly where I am.
So what does tracking your money look like? There are lots of ways to track your money, but the key pieces to track are:
- how much money you spent,
- when you spent it,
- who you bought it from, and
- what you spent it on.
- Do the same thing for the money you receive.
You’ll also need a way of totaling this information and a way of checking your calculations against any bank or credit card accounts. I recommend using a page or sheet for each account, for each month with the ending balances carrying over from one month to the next. In it’s most basic form, it’s quite simple.
Small businesses mostly often use a program like QuickBooks or spreadsheets to ensure consistency and accuracy as well as ease of computation. Some individuals or tiny businesses use paper and pen. Whatever you do, do it consistently. It’s easy to add the few transactions a day that you did. It gets a lot harder when you don’t do it for 6 months and need to enter hundreds of them.
Don’t know how to pick a tracking system? Email me and let’s talk!