If you want to be rich, you have to know your numbers. How much do you spend on groceries? On entertainment? On gifts? Even how much you tip matters.
I understand that it can be hard. When your finances aren’t where you want them to be, it’s sometimes easier to just avoid looking at them. But at the very least, there’s one number you need to calculate: your bottom line number, or your income minus your expenses.
It sounds simple, but as a financial consultant and self-made first-generation multimillionaire, I’m often surprised by how very few people can tell me their bottom line number off the top of their head.
You don’t need an elaborate Microsoft Excel spreadsheet to do this — just a notebook, pencil, and your bank accounts in front of you.
Step 1: Your income
This is the amount hitting your accounts each month after taxes. It includes any money you have from a full-time job, a part-time job, rental income, gigs, and so on. Sit down and count it all.
If your income is always fluctuating, use your average monthly income over the last six months or year.
Step 2: Your expenses
It takes a lot of money to run a life. Many of us have expenses that we don’t even realize we’re paying for, or amounts we didn’t know were so high.
Look at all your transactions and jot down the expenses for each of these line items:
- Housing (rent and mortgage)
- Utilities (gas, electric, heat, water, trash, etc.)
- Cable/TV/internet
- Cell phone
- Groceries
- Eating out
- Public transportation
- Auto (gas, repairs, parking, insurance, etc.)
- Entertainment/vacation
- Other discretionary (hobbies, personal care, etc.)
- Shopping and clothing
- Gifts/donations
- Student loans
- Auto loans
- Credit card payments
- Savings
Once you have the total, you can determine your bottom line. Here’s an example from one of my community members, Jacqueline, whose bottom line number is $243:
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