Our lives in the last decade or so have become so fast that it has become very difficult to maintain a record of all the expenses that we incur. People today find it very hard to maintain any kind of savings, and the handful who do manage them do not know what to do with them. Living on this planet is not free at all.
You need to prepare yourself when you have the chance, or the day might come when you are stuck in a bad situation and wonder how nice it would have been if you had maintained a savings account. The first thing you need to do in order to estimate your financial situation is to keep in your mind that you have zero worth and everything you have is your asset.
You want to know where you stand financially and for this, you have to add up the financial worth of your assets and subtract all your expenses from this number. Your assets constitute anything that you have and can be sold for money; some common examples are your house, your car, your salary and a trust fund.
Once you have calculated the amount of assets that you have, you now have to find out your total expenses. From the small payment that you make to buy your daily newspaper to the huge amount you spend to renovate your house, that is, everything that comes out of your pocket, will be your expense.
An ideal situation is when the amount of assets you have, exceeds your total expenses. But, if you end up getting a huge amount for your expenses that is far more than the assets you have, there is a high chance that you have missed some major items on your asset list. Good example could be the car you have had for the last 10 years, or the gifs you got from your parents on last Christmas.
If you are doing it for the first time, it will be a laborious task to track down your expenses. This is the reason why you should keep updating your financial books, and make sure they are accurate. However, this will give you a fair idea where your expenses are coming from and how your income is being utilized.
Budgets allow you to start saving, by recognizing your expenses and putting a stop to the unnecessary ones. By following these steps, you can manage your money in a much better way.