Whether you are a business owner or an individual trying to stay on top of what you spend, knowing where your money is going is essential. There is nothing worse than getting to the end of the month or year and finding out you can’t pay your bills. It is cliché to say, but you should always be telling your money where to go instead of looking back and wondering where it went.

Business Owners

If you are a business owner, you should never let multiple months go by without reconciling your bank accounts and credit card accounts (if applicable). You will never be able to effectively manage costs if you don’t know both how much you spent and on what. I want to be very clear about this, throwing receipts in a shoebox or envelope every day and paying your credit cards off each month does NOT constitute a proper reconciliation. If you run your own business, you should be using accounting software that allows you to perform the reconciliation AND can create financial statements. You should be leveraging the technology available instead of trying to “save money” by doing everything on your own. QuickBooks or something similar works great for this.

Individuals and Families

Much like business owners, individuals and families should always reconcile their bank accounts and credit card accounts as well. You may not need to use QuickBooks or other official software to do this, but you still need to do it. There are many apps that you can use to track expenses. One example is Mint. This allows you to synchronize your bank and card transactions with the app and code each expense to any category of your choice. You can then see your cash inflows and outflows every month.

Budget

I know, using the word ‘budget’ is a great way to put many people to sleep. Let us suffice to say that if you don’t do a proper budget each month and year, you will never really know if your spending covered essential costs, frivolous costs, or both. You should have a zero budget every month to maximize your potential when it comes to successful money management. Have a budget and you will win with money, don’t and you will never reach your potential.

Credit Cards

Don’t let credit card points dictate your purchases and keep you from sticking to a budget. I know too many people that think they are getting something for nothing with credit card points. I can tell you with certainty that using a credit card for regular spending does not create “free money”. That is because when you use a credit card to spend, you don’t feel the pain of the expense. I can assure you that if you use a debit card instead of a credit card, it will naturally force you to make sure you have the money to pay for things instead of hoping you can pay it off at month-end. And before you say, “but I pay my card off every month and don’t pay interest”, I am here to tell you that the lack of emotion when using a credit card will undoubtedly cause you to spend much more than the “free points or rewards”.

The moral of the story is, regardless of where you are in life and what your goals are with money, tracking and effectively managing your expenses EVERY month will lead you to more success and open doors for opportunities that can only come when you are financially free. The journey takes time, so be patient and intentional with your spending and you will find yourself far better off down the road.