Since 2009 when I started my career as a chemist, I began tracking my financials in great detail. The way I track my money today is very different from when I first started tracking in 2009, but the purpose is still the same. If we take a step back and look at the overall picture, I am basically using income and expenses as my key performance indicators. Being successful in tracking your financials is not always as easy as just that because there are so many moving parts in our world. Some financial impacts can be predicted and others simply cannot be predicted. We can always plan for the predictable impacts, but when it comes to the unpredictable impacts, we really just need to prepare ourselves for the worst [and hope for the best].
So, getting into the details of your financials… We cannot be lazy and need to put effort into tracking our financials month over month, year over year. We need to build a database to help us make the best decisions possible with the information available to us. As I have always mentioned, gather information/data to better prepare ourselves for the future. Imagine taking organic chemistry without taking any of the prerequisites that you need to get into organic chemistry. Unless you are a super-genius, you are probably going to do horrible in organic chemistry. It is not simply because you do not want to do well, but because you do not have the tools or background information to do well. The same goes for when you are organizing your financials and trying to make decisions.
There are also a group of people who do not want to dig into their financials because they are aware they are not living their life appropriately when it comes to the financial world. For someone who makes $20,000 per year and purchases a $50,000 car, you need to realize that this is the smartest thing to do. For one, you are going to go into extreme debt and will most likely not be able to dig yourself out. Additionally, purchasing an expensive car is not always the greatest investment for your money. All your money will go into interest and eventually fixing that car when it gets old. I shall get back to the main topic, as I am now just ranting.
The purpose of this blog is to talk about digging into the details of your financials to better understand your current situation, your goals, and how you are going to achieve your goals. As I always mention, understand your goals and build a plan to reach them in a timely manner. Make them reasonable and attainable, so you can achieve them within your lifetime. Having a database with your past financial history can really help you determine where you can go and if it makes sense. Using bank statements, credit card statements, mortgage history, and so forth, can really help you out here as well. Especially, during the first year or so when you do not have any history tracked in your own notes. I use excel spreadsheets because it is what I know and I feel most comfortable with it. You can use any tool which you feel most comfortable with. Give it a try and let us know what you think.