We are approaching the end of the month, so I naturally started thinking about the income report I will be doing within a few days. I thought that I might share my process and also the reasoning behind why I do it. I feel this is a topic that many people just don’t want to think about at all. And probably it’s mostly the people that are doing badly financially that don’t want to dig in and discover how bad it really is. It has potential to invoke a lot of anxiety. I can understand that because an income report is really an in your face approach to personal finance. It’s black on white, no fuss.
If you have any financial goals what so ever, and most people do, you need to track how you are doing. I like comparing it to going to the gym and lifting weights to get stronger. You will get much better results if you keep track on your workouts and taking notes of how much weight you are lifting. Because then it’s easier to see where you are failing. If you are stuck on the same weight on a single lift for months, then it’s time to analyze the situation and make some adjustments. If months are passing by and your income is still lower then your expenses, some adjustments will be required. Either looking at your expenses and see what can be cut or finding new ways to bring in money.
For me as a beginner freelancer, when I decided to take the leap I had a nice sum of money saved up. Because I knew that my income would not cover my expenses to start with. And ever since I took that leap, I’ve been making a monthly income report to track how its going and how long my savings are going to last in the pace that I’m currently spending.
Make it simple.
I use google spreadsheets to track the numbers monthly. In Sweden it was much easier to see exactly what I was spending money on since I used my debit card to pay for everything. Even like a 1 dollar pack of chewing gum. But in Thailand it’s harder since here I use cash for everything so now I will just see big ATM withdrawals on my bank statement instead. But that’s good enough, for now I just look at the total expenditure. So once I have that total expenditure number for the month I write that down in the spreadsheet like in the picture below.
Then I check all the different incomes I had for the month, add those up and write that total number in there including taxes. After that you will clearly see the change for the month, whether you made money or lost money. I also like to keep my total cash amount in there to see how much I have left. By the way, sorry for writing in the sense of “loosing money”, “burn rate”, and trying to stay alive basically lol. That’s just because it’s the spot that i’m at personally at the moment but I’m sure many of you out there are making much more and are in the green.
Doing all this is not complicated at all. You can easily make it more complicated and time consuming by tracking exactly everything you are spending. But the real hard part with this is actually DOING IT. It’s so easy to make that spreadsheet, filling it in the first month and then letting it fade into the abyss.
If you want to reach your goals, you need to track the journey on the way there. It will be much easier to see how you are doing and spotting things you can fix.