How I Track My Money - The System That's Making Me A Millionaire

Introduction

In this tutorial, we'll explore a comprehensive 3-step system for tracking your money, inspired by the financial practices of a junior corporate lawyer in London. This method not only helps you understand your spending habits but also encourages you to make informed decisions about your finances. By the end of this guide, you'll have the tools to analyze your financial health, increase your income, and calculate your net worth effectively.

Chapter 1: Track Your Spending

To effectively manage your finances, begin with a detailed review of your spending. Here’s how to do it:

1. Gather Transaction Data

   • Collect CSV files from all your bank accounts. Avoid PDF statements, as they require more time to convert.
   • If you have multiple accounts, ensure you compile data from each one.

2. Consolidate Data into Excel

   • Open Excel and create a new spreadsheet.
   • Copy and paste transaction data into a single sheet. If you have multiple bank statements, create separate sheets for each and then merge them.
   • Use the Excel table function to organize your data.

3. Standardize Data Format

   • Ensure all spending amounts are in the same format (negative numbers for spending).
   • Delete transactions under a pound to simplify your analysis.

4. Categorize Your Spending

   • Identify spending categories (e.g., groceries, entertainment, utilities).
   • Use the transaction description column to sort and categorize spending. For example, group all Aldi transactions under "Essential Food."

5. Analyze Spending by Category

   • Use the SUMIF function to calculate totals for each category:

     =SUMIF(F:F, "Bank Fees", D:D)
     

   • Format your totals with currency symbols and use the AutoSum feature to get an overall view of your spending.

6. Review Findings

   • Sort your spending categories by amount to identify where you can cut back.
   • Reflect on whether each category aligns with your values and priorities.

Chapter 2: Increase Your Income

Once you have a clear picture of your spending, it’s time to focus on enhancing your income.

1. Evaluate Salary Negotiation

   • Assess your current salary and consider negotiating for an increase if you feel justified.
   • Research industry standards to understand what others in your role are earning.

2. Consider Job Opportunities

   • Explore job openings that may offer higher salaries.
   • Weigh the pros and cons of switching jobs, including potential stress and changes in work-life balance.

3. Explore Side Income Options

   • Think about starting a side hustle or freelance work.
   • Consider investing any idle cash in high-yield savings accounts, bonds, or dividend-paying stocks.

4. Stay Informed

   • Keep learning about investment opportunities and market trends.
   • Regularly review your financial options to optimize your income potential.

Chapter 3: Calculate Your Net Worth

Tracking your net worth is crucial for understanding your financial progress.

1. List Your Assets and Liabilities

   • Write down all your bank account balances, investments, properties, and any other assets.
   • List all liabilities, including loans, credit card debt, and mortgages.

2. Calculate Net Worth

   • Subtract total liabilities from total assets to find your net worth.
   • Track this figure regularly to monitor changes over time.

3. Analyze Changes

   • Reflect on the factors contributing to increases or decreases in net worth.
   • Use this information to adjust your financial strategies, such as increasing investments or paying down debt.

Conclusion

By implementing this 3-step system, you can gain valuable insights into your financial health. Regularly tracking your spending, seeking ways to increase your income, and calculating your net worth will empower you to make informed financial decisions. Aim to repeat this process annually or semi-annually to stay on top of your financial goals and adapt to any changes in your situation. Start today, and take control of your financial future!