In my first post about starting to manage your money, I taught you how to track your income and spending. You probably feel like Einstein or something with all this knowledge you have now. But really, you’re more like Thor, because knowledge is power. I’m really trying to make personal finance interesting okay guys bear with me.
Pat yourself on the back, because honestly, what you know now is more than what many adults know about their finances.
In this post, you’re going to learn if you’re spending more than you’re making, or if you’re making more than you’re spending. It’s always nice to fall into the first category, but if you don’t yet, that’s totally okay and something we can work on later.
Before diving in, check out the article on how to start managing your money. This next step won’t be much help to you without going through the exercise I described in that post.
Income Minus Spending
Under the last entry in your income document, create a “total.” This is where you will add up all your income.
Once you’ve added up your income, it will look something like this:
We’ll call whatever $XXXXX is “total income.” You can calculate this number using a calculator, or by using the “sum” formula.
Next, do the same thing with your spending and label it “total spending.”
Now for the grand finale. Subtract total spending from total income to find how much money you saved. Your math will look like this:
TOTAL INCOME – TOTAL SPENDING = TOTAL MONEY SAVED
If your “total money saved” is positive, that means you’re making more than you’re spending, which is a great sign! You may already have some decent budgeting skills.
If your “total money saved” is negative, it means that you are spending more than you are making. Don’t worry about it too much right now, but know that this habit is not sustainable. Either way, you’re doing the right thing by going through this exercise, and you’re already on your way to a better financial future.
I know, that was a lot of math. But look how much you know now! Comment with what you learned!