Updated: Jul 6
What is it?
It's learning and knowing about your finances for yourself - no matter your financial situation.
As an elementary school educator, I often work on 'wh' questions with my students. We read stories and they learn how to comprehend the story based on the five 'wh' questions who, what, where, when, and why. This gives them a deeper understanding of the story, rather than a surface level comprehension of what took place.
I like to apply the same concept to understanding our finances. When I have spoken to other people about this topic, there are a lot of mixed emotions. Money can be a hard topic, especially when it seems like there isn't enough. However, I'd like to pose an idea. Perhaps by learning more about your finances, you'll be able to make better decisions about what you do with your money, rather than making decisions from a surface level understanding. Simply put, not knowing what your finances look like won't make your financial stress go away.
With anything you are trying to improve in your life, I will always recommend starting small. Use these five 'wh' questions to start gaining a better understanding of what is exactly going on with your money.
Who are you giving your money to and who is giving you money?
Answering these two questions should be fairly easy. Note your sources of income and then make a list of every bill you have to pay, even if it's not monthly.
What amount do you need to pay?
What amount will you get paid?
Will these amounts change every month?
What bills are household expenses versus debts?
I will tackle debts in a different post, but you should still have an idea of how many debts you have. If you think in categories (e.g., housing, transportation, food, loans, credit cards), it will help you answer these questions.
Where do you pay your pills?
Where (which bank account) will the company pull the payment from?
Which bills are paid directly via the company's website?
Most bills, if not all, are paid online. However, keeping tabs of the website you use to pay bills not just helps you, but also helps a spouse or partner know where your bills are paid.
When will you get paid?
When are your bills due?
When do payments need to be made?
(I also like to note which bills will be auto deducted from our account). Knowing the answer to these questions has been a huge stress reliever for me. For example, I know we have a lot of bills that are due around the 15th of the month. Have you ever been asked "When would you like that payment to come out?" To answer that question, you really need to know what dates your other bills are due. Also, it helps me know when I should see more deductions from our bank account, which can be stressful (you know when money seems to fly out of the account). Since I now know when this will happen, I am no longer stressed, because I expect it and I've planned for the funds to be available.
These can be the more challenging questions because it may involve some homework. Here is where you'll ask yourself what you still need to know.
Why did that payment come out twice last month?
Why are we still paying that bill?
Why don't I see a payment for last month?
Why did our payment increase?
These questions can be challenging to answer at first, but I promise you they will put you in a better financial position. I am in no way a financial guru. I ask our tax and financial advisors so many questions sometimes that I think I should add them to speed dial! However, there isn't anything in life that you can truly fix without knowing exactly what you are trying to fix. If there isn't enough money at the end of the month, these questions will help you pinpoint why. If you have extra funds at the end of the month, maybe it will help you pay off a loan or credit card.
You work hard for your money friends, you should know where it's going. If the idea of creating a budget is stressful for you, you can purchase the same budget I created and use for our family in our shop: The Smarter Monthly Budget Template . I love this budget because it not only helps you track your expenses, but it also helps you determine when you should pay each bill based on when you get paid each month.
Alright friends, until next time!