Seven Secrets to Money Success - Number 4

Money in the bank doesn’t mean available to spend
Do your income and expenses arrive at exactly the same time each week or month? Or do they have a habit of arriving at the most awkward time? Like a few days before you get paid. For many people, understanding this principle allows them to plan their income and expenses separate to their bank account. Remember there are two aspects to your finances. What you are doing and what you have left. The money that you have in your bank is what you have left after your previous income and expenses. So using your bank account as the basis for deciding whether to spend or not would be fine if everything stopped at the same time. If ALL your expenses had been paid for, then what was in your bank account would be available to spend on whatever you wanted. HOWEVER expenses are quite likely to arrive BEFORE you next pay and therefore the money that is in your bank account is not available to spend frivolously. Your bank account balance is at a point in time and does not take into account what is coming up before your next pay. So just because there is money today doesn’t mean it is not needed for an expense which needs to be paid before your next pay packet. You need to have a method of planning your income and expenses which is separate to your bank account because, as stated previously, your bank account is only a point in time and does not take into account what is coming up in the future. Keep a separate sheet of paper and on it write down all you income and expenses. Use this as the basis on whether you can spend or not because it can cater for future activity. If you have additional income or you can minimize an expense on the sheet of paper, this will give you additional spending power. If not, the money in your bank is only there for a short time and will be swallowed up with expenses you have already planned for.

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