You’ve been working all year and unbelievably to you, the summer is here. You’ve tried to follow a budget so that you can keep that vacation bucket list, and then it dawns on you. You have spent every last penny that you tried to save. How could this have happened? What in the world did you spend the money on?
Well, the first step to understanding your spending is to go to your bank. Not literally, but go online and log into your account. If you use BOA, Chase, PNC, Wells Fargo, TD Ameritrade, or any of the many commercial banks, you will also have access to your spending and be able to create a budget online.
Now, depending on your understanding of income and expenses, you might have a misunderstanding of budgets. So, let’s break it down:
- Your income is all earnings and wages that you accumulate throughout the year.
- Now your income is offset by expenses and liabilities that you may have acquired throughout your lifetime:
- To be specific: expenses are monthly or annual bills that you must pay as a part of your living expenses.
- Liabilities are debt, loan, etc., that you’ve accumulated that have consequences if not paid on time.
- Lastly, if you are left with an excess of your income, this is called discretionary income, however you may end up with no money or even a negative amount in the bank when your expenses outweigh your income.
- Whatever the circumstance, if you are left with an excess of funds after paying all of your expenses and liabilities, you now have money to make personal decisions with such as budgeting, saving, or vacationing.
You might’ve told yourself that this would be the year to change everything. But, as you review your checking account against your plans, you might experience a shortfall. You find that don’t have enough money to fulfill those dreams of yours. How can you possibly combat this issue so that you are not repeating the same mistakes next year?
- Be honest with yourself.
- Live your financial reality.
- Review your spending with an open mind.
- Are you engaging in emotional purchases?
- Do you absolutely need the things you are purchasing with your discretionary income?
- How much of your income is being spent on wants and not needs.
- Can you stop spending money on this thing (or service) for awhile and be OK?
Our spending is reflective of our emotional state. For example, when we’re happy we spend money on specific things; meanwhile, when we are not feeling up to par, we also spend money on certain things. By reviewing your spending, you will get a clear idea of whether you are experiencing a happy or sad moment in your life. This will be the blueprint to understanding your spending and ways to change in order to live out your best life (and complete that bucket list).
So, let’s give it a month or so and we will review your spending in detail in order to create a realistic budget and plan an outstanding vacation. Til then, spend this summer doing small (but fun) things like heading to the beach, a picnic, poolside party, or a bar-b-que. Either way, have some inexpensive fun this summer.