Author and blogger, Thomas Corley, wrote a book after interviewing hundreds of self-made millionaires. He recently wrote on his blog, “Do you know where your money goes? Some people do. They are called self-made millionaires.”
Of course, ‘knowing where your money goes’ is only one of the puzzle pieces for becoming a millionaire. However, it is an important foundational skill for both personal and business financial management. In order to have savings for investing and learning, there must be surplus money at the end of each month, quarter, and year. For that to happen, you need financial awareness to know where your money is going in both your personal life and business life. It is the only way to reveal reality; plus uncover over-spending and errors. And most importantly, it is a tool for setting priorities against limited resources, namely your income and time.
As an exercise in learning where your money is going, Mr. Corley recommends, “tracking every penny you spend for 30 days and then review it at the end.” I would go a step further and advise that you budget the entire year, by major categories, and then evaluate each month to determine if you are on track or not. This way, you can make adjustments before there is any financial crisis that is developing over time.
If you are interested in more of Thomas Corley’s material, this is his website: http://richhabits.net/