First blogged here. Edited post.
At the beginning, when I got married, we spent pretty much all our savings on the wedding itself, on some furnishings and on transportation. That was mostly money that came from a an informal Ã¢â‚¬Ëœsavings scheme’, so we had saved for nearly a year to generate that kind of cash. But it was all gone.
So we had to start from nothing again. That wasn’t the first time, either. The previous year, we had spent all our cash on a trip to the UK to visit family. Boom! All gone. While it wasn’t easy come, it was certainly easy goÃ¢â‚¬Â¦After we got back from the wedding, and our break, I realized that we had to do something to improve our financial situation. So I started keeping a monthly statement of assets/liabilities to find out what we had and chart its variations. This certainly had a big impact on finding out where we were and how things were going.
The document simply stated: money in accounts, money owed, cash on hand, etc. Normally, it would have included liabilities as well, but we literally didn’t have any. No mortgage, credit card or any other borrowings.
(edited) This act of keeping a record of our statement certainly had a very beneficial effect as it helped to concentrate the mind. And I would heartily recommend this process as a first step in getting a grip on your current financial situation. It doesn’t have to be particularly sophisticated either. If you read many of the bloggers, you will find them using Excel, Money, Quicken, or whatever, but you just need three things: a paper, a pencil and a file. A calculator is optional for those who can’t add well!
The file is very important, because it helps to tell the story of your financial situation as it develops. You can compare your results across months, quarters and years to identify the conscious and perhaps subconscious trends that permeate all spending patterns.