How to keep track of your income
Keeping track of one's income is an important task. It involves the careful balance of numbers. As everyone knows life costs money. There's car insurance, house insurance, life insurance, food expenses, luxury expenses, car payments, house payments, and a variety of other things that you, the owner of said things, must pay for. Paying for something involves taking cash out of your bank account and putting it into someone else's. Therefore you must have cash in your bank account in order to buy something. This may seem like a simple concept but some people just don't get it. Buying things you can't afford is a surefire sign that you aren't keeping track of your income.
Keeping track of ones income is more complex then just figuring out how much you make and subtracting what you buy. Sure, this is the principle but many factors confuse the process. First and foremost are taxes. You can say you make 100,000 a year but how much actually ends up at your door? A large chunk of the money goes straight to the government. Oftentimes companies will take a certain amount of money out of the paycheck automatically to pay for things like life insurance. Then there's state insurance which is also a good chunk of money.
Once you've figured out what you actually bring home you have your baseline. This is how much money you can spend. Divide it by 12 and you have a monthly spending limit. If you go over this limit you'll end up going in debt. Once you get into debt it's very hard to get out. Buy things that you can afford only! Realize that your monthly spending limit is going to reach almost 0 once you factor in your car, house and other payments. If you add in interest payments for unnecessary things like a boat or a motor home you're just shooting yourself in the foot. If you do the math and just have patience you'll soon be able to afford that luxury item that you've wanted. Buying it before you can afford it is never a good idea!
One of the best ways to avoid financial difficulties in the future is to save up money. Don't spend everything that you earn. Life is full of unexpected bills. There are medical bills, bills for that tire that popped on the freeway or that engine that broke down, and there are even bills that you receive due to something like irresponsible driving. Tickets are very expensive! If you life off of 80% of your income you can save that other 20%. Once you have enough saved up you can spend it on what you like! Don't spend the entire thing, however, as unexpected bills may come into play. If you don't end up spending your savings you'll just be able to enjoy the extra money once you retire. It really is that simple! Keeping track of your income is extremely beneficial. You'll be able to avoid fiscal problems for your entire life if you're studious about tracking your income.