## Saturday, June 9, 2012

Jack had 3 silver coins in his bag. He gave one to Jill and one to John. How many silver coins does Jack have now?

I know this is way too simple a mathematical question for you. So don't bother calculating it. But here's what you need to solve -
Put yourself in Jack's shoes. Think how much money did you have at the beginning of the month, what came in to your bag (or bank account!) and what will go out of your bag by the month end. Now arrive at what you will have at the end of the month.

Does the math seem tough all of a sudden? :)

This math puzzle before you is basically what constitutes your financial budget for the month. It is very important for any family to have a budget. In today's economic situation, we absolutely must have a handle on this puzzle to meet our long term dreams and aspirations. I am not talking dreams of becoming millionairess very soon but simple dreams of living happy contended lives.

If you dream of saving money and building assets for your future, the first step is to track your finances. You need to know how much income you earn and how much you spend on month to month basis. Once you have this information, it is much easier to plan how much you can save and what to do with the savings; or worse case, you can figure out how much you are short and how best to face this shortcoming.

I remember my dad using a little diary to make notes every month once he got his salary. He and mom would sit together and list down all the expenses they had to take care of in the diary. He would write down the name of the month and underline it. The list underneath would go something like this -  newspaper, milk, school fees and supplies, fuel, groceries etc. Later as he paid off each of these expenses, he would strike it out in his diary. So now he knew how much he spent, how much he still had to spend and more importantly what was left at the end of the month.

I pretty much started out doing the same when it was my turn. Just that I did it on an excel sheet on my computer instead of a diary :). I had a column to track my income, a column to track my expenses and at the end a simple excel formula to tell me whats remaining. Now i have discovered there are some websites like Mint.com that allow people like us to do the same online. Mint.com is free and seems to be pretty safe based on my experience so far. It tracks my accounts and transactions and produces beautiful reports detailing my income, expenses, savings and even trends related to my expenditure!

Whether you prefer to conveniently let a website track it for you or prefer to maintain the log yourself, it is absolutely necessary to do this as a first step towards managing your money. This log is your key to find what expenses can be avoided or curbed in future. This log will tell you if you are headed in the right direction. So go ahead and get started on this immediately.

I will share more details about Mint.com based on my experience so far in my next post.