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A Spending Personality Assessment, The Process
Developing a Personal Budget, A Cash Flow Worksheet, A Balance Sheet
To start your wealth building program, you must establish a reference point. You must develop a monthly cash flow worksheet and develop a personal budget.
Once you know how much money you make and where it goes each month, you will know how much you can save.
To accomplish this, you will need to do a Spending Personality Assessment (SPA) Review.
Every person has their own unique personality. This personality is reflected in finance: what we eat; how we dress; how we decorate our rooms or homes.
Our personality is also reflected in how we spend our money. Corporate America knows this all too well as they track what we buy, and how often we buy it.
Do you notice how you get certain advertisements in your regular paper mail and your e-mail? Corporate America tracks you when you use a credit or debit card. It’s called point of sale processing.
Every one of us must identify our spending personality to separate our needs from our wants. Whether you are a couple or single, your spending personalities are reflected in your buying preferences.
It’s a mandatory process in understanding your spending personality, so you control it and not have it control you. Once you have a clear understanding of your spending habits, you will know how much you can invest for a brighter financial future without sacrificing those things you need to survive in today’s economic world.
How it is done: SPA A Review – A Very Important Process
If you have never done this before, here is your wake-up call for an unforgettable experience.
1. The first thing you must do is prepare a projected budget. If you are not budgeting, you will find it difficult to achieve financial success.
Remember: If you are not watching your money, someone else is and they will figure out a way to take if from you. Appendices under Exhibit 3, is a sample of a personal budget. You can create one using a blank piece of paper or from a formatted version like the one given here (Microsoft Excel) or you can use one off of the internet. Get assistance or send me an e-mail if you need assistance (my email address is: robert@ifiecorp.com).
2. The second step is to collect every bill and every receipt for every dollar you spend for the next 45 days. Get a large bag or envelope and just stick the receipts in it. Make this a habit so you do not miss anything or leave anything out.
3. The third step is to take a budget retreat. A budget retreat is where to take (make) time to review and analyze those receipts. This process will help you identify your spending patterns and habits. Prepare a new final budget and compare it to the projected one.
4. Step four is to identify and separate your needs from your wants. Needs are the things you must have to survive (shelter, water, food). Wants are those things you would like to have. Focus on the things you need and set up a special saving account for those items you want. By doing this, you can purchase them when you are ready (especially if they are on sale). The best part of this exercise is – if you do it correctly (being very thorough), you will only have to do it one time. This exercise helps you get in the habit of collecting your receipts and assists you in tracking changes in your spending habits.
Exhibit 3 is an example of a template of a budget worksheet. The worksheet has three columns. Fill in each column starting from the top left column as follows:
Column 1 (at the top of the page is your net Cash (monthly) Income. Start at the top left (Column 1) of the worksheet. Fill in a description of your income(s) and expenses.
Column 2 are the amounts of your net monthly income. Your Total Cash Income will be the total of all of your income(s).
The Process of a Spending Personality Assessment,
Column 3 are expenses. You can track a broad range of household items, utility items, food and insurance to medical expenses, credit cards, etc. Fill in Column 3 in a detailed, itemized list of all your expenses.
Total each column and Subtract Column 3 from Column 2 to see what your Net Cash Flow looks like. As you practice working with your budget and this worksheet, you will see how your spending personality effects your expenses and most importantly, your income.
Get comfortable with this process. The more you review and analyze your spending personality, the more you can begin to identify your savings potential and start building wealth.
3 are expenses. You can track a broad range of household items, utility items, food and insurance to medical expenses, credit cards, etc. Fill in Column 3 in a detailed, itemized list of all your expenses.