Previously, I have written many times about the flow of money and money loss due to unnecessary fees and interest. To successfully manage personal finances, we need to understand money flow and where there are potential vulnerabilities for money loss. I run my personal finances similar to the way a business should be run. My goal is to run my personal finances as lean as I possibly can without sacrificing quality of living. There are simply things I do not need. By removing these things from the equation, I am able to run my life more profitably and further guarantee success.
From month to month, it can be difficult to estimate expenditures with great accuracy and precision because they can often fluctuate each month. Similarly, if you do not have a steady salary and your income varies each month, this can also be difficult to estimate with great accuracy and precision. The key is to spend less than you make [obviously]. By reducing your expenditures, you are freeing up more money for greater uses such as investment and/or paying off debts faster. Over an extended period of time, this adds up. Unfortunately, many do not benefit from this because they never put effort into building their financial portfolio.
Through many years of tracking my personal finances, I did find my income to debt reduction is not a 1:1 ratio. I’ve asked myself, why not? As I get closer to paying off my debts, the ratio does become closer to a 1:1 ratio, but still does not get there. So why is my income to debt reduction not a 1:1? Our income does not only go to paying off debts and is also used to purchase food, fees, interest, utility bills, and so on. This is another reason why reducing expenditures is very important. As we reduce expenditures and increase income, we are able to produce a much better income to debt reduction ratio. I cannot emphasize enough that paying off more debt faster will create a better money flow for you down the road with fewer losses or financial vulnerabilities.
Last comments I will make on today’s blog are, writing a journal often and accurately will help you track your successes. I have been keeping my journal since June 15, 2005 consistently to track my successes and failures. This journal is one of the best tools I’ve invested my time into and I am constantly improving it as I go along. My journal keeps my focused on my goals and constantly thinking about achieving my set goals. Give it a try!