I mentioned in my previous post how I encountered an article from an old magazine while cleaning my room. Well I'm an accountant. It's normal for me to compute automatically when I see numbers. That's what triggered me to get a reality check on my financial status. I hope this post would do the same to you.
On the same night, I sat in my room and stared at my bank book and mull over my finances and spending habits. Here's how you can too.
1. List all source of income and how much you earn from it.
Right now, I have a single source and that's my full time job which basically earns me the same every payday. Now if you're working several part time jobs that have varying income, get the average and don't over estimate.
I suggest getting the middle of your lowest income and most consintent highest income from that part time job.
2. List your expenditures
Get all your available receipts, bills and credit card statements ready to get a better idea on what you spend on. Separate your needs from your wants and write down its cost or estimated amount if it varies per period. Also, provide an allowance for those impulse purchases like the purse you just saw and swiped on your card.
In a month, do you make enough to allocate money on the list you have? If "no", then you're obviously living beyond your means and relying on your next paycheck to cover for it. You better start eliminating some unnecessary spending habits for the next period or think of a payment plan if it turns out you can only pay for it long term.
If "yes", don't get too excited because there's a lot more to go on to.
4. Look on your bank book and think carefully.
"If something suddenly occurred, say you car broke down and needs repair, is what you currently have enough to pay for it?" Now think of something urgent and expensive like "If you suddenly got ill and needed to rest and pay for medication, would you have enough to get your monthly expenditures covered without worries?"
If you answered "no" to any, your next resort is probably to borrow money to pay for it. Then the cycle continues.
You work to earn in order to pay your bills and loans.
If you are ever stuck in this cycle and don't do anything about it, you may find yourself shaking and recounting coins in your palm praying to have enough to pay for your fare the next time you check it. LITERALLY.
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