Where did my money go?

Question: I get it, I need to save. But I don’t know where my money goes. Whenever I put money in my wallet at the start of the day, it’s gone by the day’s end. So, how can I save something that’s so elusive?

Answer: Before you are able to save, you need to be aware of how money flows in and out of your finances. For this, the Personal Finance Advisers has come up with the Reality Cash Flow (RCF). You need a pen and a small notebook for tracking.

On day one, count how much money you have in your hand, pocket, purse or wallet and nothing more. We will call this your “beginning cash on hand.” Don’t include money in your piggy bank or even money in your bank.

As you go through day one, you might need additional money either through withdrawals from your [piggy] bank or by taking out loans. When you do, your cash on hand increases. If it’s a withdrawal from your savings, jot down “withdrawal” and the amount in a subsection you will call “sources of cash.” If it’s a credit card availment or loan, jot down “loan” and the corresponding amount also under sources of cash.

You will no doubt spend money. Lump your spending into major categories like food, transportation, children’s education and the like, and write down the amounts spent under a new subsection called “uses of cash.”

If you bought an item through a debit card or loan, jot down under sources of cash the amount of transaction (e.g. withdrawal from savings via the debit card or loan), and the corresponding amount with spending purpose under uses of cash. Cash still flowed, just in an electronic book entry way.

Before you end day one, get your beginning cash, add to it the sum of your sources of cash and deduct from the answer the sum of the uses of cash. You will call the result your “ending cash” for day one. That amount should balance with what you have in your hand, pocket, purse or wallet. If not, recheck your entries and math.

Your ending cash for day one will be your beginning cash for day two. Repeat the cash tracking process for day two. Again, your records should balance with what you have in your hand, pocket, purse or wallet at end of day reconciliation.

Repeat the process for one week and you will immediately realize how money flows into and out of your finances. But that is just a realization. You will need to make it a habit of tracking your cash flow. So, why not do the RCF for three more weeks and two more days to complete one month? This will help you home in on transactions that drain your cash balance to allow you to control the “leak” and save.

Over 9,000 training participants of the Personal Finance Advisers have attested to the effectiveness of RCF. Why not try it? You have nothing to lose and have everything to gain.

Now, it will be difficult to do RCF alone. So, get a partner to help you challenge and check on each other. There are also SMS-generated coaching programs on personal finance that will indirectly remind you to keep doing RCF. And the good news is that some of these are free.

While prosperity starts with savings, analysis of your situation through awareness of how cash flows precedes saving. INQ

Send questions via “Ask a Friend, Ask Efren” free service at personalfinance.ph, SMS, Viber, Twitter, LinkedIn, WhatsApp, Instagram and Facebook.

Efren Ll. Cruz is a registered financial planner and director of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books and a YAMAN Coach. E-mail [email protected]. To learn more about personal financial planning, attend 98th RFP program this October. Email [email protected] or text 09176248110.