Business owners know that keeping an eye on their bottom line is essential if they want to be successful. So they use profit and loss statements (P&L) to keep a detailed record of their expenses, revenue and cashflow over a set period of time.
As the chief financial officer of your own life, you also need to take a long hard look at your books – because what gets measured, gets managed. To do that:
- Record your income and expenses
Most of us have a good idea of how much money we bring in each month. But do you know where all your dollars go? Tracking your spending is the first step if you want an accurate picture of your current financial position. Once you’ve done this, subtract your expenses from your income to get your own personal P&L statement.
Once you know where your money is going, use this information to set a personal budget. Part of this process includes identifying your long-term financial goals. Set aside some of your ‘profit’ each month to save towards them.