How To Plan Your Money? The Key To Create Wealth

If you ever want to create Wealth you cannot joke with planning your money. Planning is key to anything that would be successful in life. Planning cut across every area of life, education, marriage, travel, vision, etc.

“It is not how much you make that matters, it is what you do with what you make that matters”… Dr. Olumide Emmanuel. Planning is the distance between the beginning and the ending.  Planning helps you to regulate time and change. It is often said that he who fails to plan has already planned to fail.

If you don’t plan your money, your money will be wasted. If you don’t plan your time others will use it for you.  If you fail to plan your money, your money may not be able to carry you. Take for example if you receive N300,000 as salary monthly, if you spend anyhow without planning you might end up borrowing money before the next salary comes.

Dr, Olumide Emmanuel said, “it is not how much you make that matters, it is what you do with what you make that matters”.  It is the plan you have or have not that will determine what you do with what you make. If you don’t plan your money someone will plan it for you. Planning your money is taking control of your financial future.  Your dream of becoming wealthy will remain only a dream until you have a plan on how to achieve it.

People have wasted their time and resources because they failed to plan.  Failure to plan simply means a future, life, finances, etc. left to chance. And anything left to chance might likely not succeed. A good plan can be likened to a roadmap; it shows the final destination and usually shows the best route to get there.

What is planning?
Planning is a documented preconceived determination of how you use your time, money, energy, and relationships.  It is one thing to make money it is another thing to grow your money. Therefore planning is key if you want to grow your money. One area of planning you must take very seriously is budgeting.  This is talking about making a budget on your income. If you want to take control of your spending and work towards your financial goals, you need a budget.

Budgeting is a financial management tool that helps you to create wealth or grow your money. Budgeting is creating a plan to spend your money. Good budgeting is spending less than you are earning as you plan for your financial goals. Budgeting is the fundamental step in achieving financial literacy, and by extension, reaching financial security and freedom.  Budgeting is the process of creating a plan to spend and invest your hard-earned money wisely to meet your personal and financial goals in life.

It should not be a mathematical exercise that we think we have to endure; rather, it is the result of a self-assessment of our relationship with money and a necessary road map to steer us toward a higher standard and quality of living.  Budgeting is balancing your expenses with your income now and for the rest of your life.

For successful budgeting, you can follow these five steps listed below.  Set goals, you must set financial goals.  Goals can be short-term and/or long-term goals, they can be personal, educational, social, financial, and recreational. Collect your financial information. After setting your SMART goals, you need to collect and organize your financial information to help you save time while searching for documents so that you do not miss payment deadlines.

A document is to create a personal financial directory.
This could be as simple as creating a list of all your financial accounts using a secure document that is on your computer and protected by a username and a password (Please do not write it down and keep it under your keyboard!) Most financial transactions are done electronically; get a receipt of your electronic transactions, that being said, a budgeting journal will be fine as well. Whichever method you use, be diligent in protecting your identity, your assets, and your financial information.

The most common dilemma in organizing your financial documents is knowing which receipts you should keep and which ones you should shred away. This can be solved by understanding the purpose and life cycle of receipts as you organize your financial records. A cash grocery receipt will no longer be needed after the amount is transferred to the budget sheet/journal /computer.

Track your cash inflow.
A successful budget starts by documenting all incoming sources of cash flow. This process is called tracking because it helps you track money coming in as well as money going out. Several months of tracking income and expenditures should provide you with enough information to assess your financial health.

Tracking helps you see a trend of how income is being spent. Tracking provides you with an analysis of all money coming in and all money going out to help you understand your financial behavior and spending tendencies. Always remember that your gross income is subject to tax and other deductions.

Your net income (take-home income) is what your budget is based on, not your gross income.  One of the goals of tracking is to account for all money coming in and to differentiate between what is your hard-earned net income and your borrowed money. That is if you borrow money and remind you of the repayment of your loan.

Track your outflow (expenditures). As you analyze your expenditures, it is critical to visualize the pattern of your spending habits and to recognize what drives your spending decisions. Culturally, we value material possessions; these items are a testament to someone’s wealth regardless of the sources of funds… People need to differentiate between what they “need” and what they “want” as part of their assessment of their financial health.

There are several methods for completing a tracking sheet for your expenditures.  You could keep all receipts, regardless of how you pay for them, (cash, credit, or debit card) or you can record every transaction daily using a tracking application on your computer or your cell phone or budgeting journal.

The idea is to account for all of your spending or purchases, and sum them by category and amount at the end of each week, subsequently for each month, and then for the entire year.  This would be your actual cash flow spending from which to draw your average monthly budget. It is recommended to track your expenditures for one year to formulate a complete picture of how much money you need to live on based on your standard of living.  A year’s worth of expenditures helps you keep track of periodic payments such as rents etc.

Most commonly, budgets are done monthly, because most bills are calculated every month, such as rent, utilities, electronics, light bills, cable subscriptions, etc. Regardless of when you get paid, you need to convert your income and your expenses into a monthly scale if you chose to create a monthly budget, or a yearly scale if you chose to create a yearly budget.