Stop Asking Where Your Money Went

At the end of the month, millions of people ask themselves the same question:

"Where did all my money go?"

But that's the wrong question.

By the time you're asking it, the money is already gone.

The better question is:

Where do I want my money to go?


Most people think budgeting means restriction.

I think budgeting is really about direction.

Every dollar that enters your account should have some kind of purpose: living, saving, investing, building, or enjoying.

That doesn't mean obsessively tracking every coffee or refusing to enjoy your money. In fact, I think a good budget should explicitly include money you're allowed to spend guilt-free.

But it should also protect your future.

That's why I like separating money into three broad categories: needs, wants, and growth.

Needs maintain your life.

Wants help you enjoy your life.

Growth improves your future life.

Investments, skills, education, businesses, projects, and equipment shouldn't automatically be treated the same way as ordinary consumption.

And there's one number that makes all of this much easier:

Your real monthly cost of living.

Once you know that number, savings stop being an abstract number in a bank account.

If your life costs $1,200 per month and you have $7,200 saved, you have approximately six months of financial runway.

You're not only accumulating dollars.

You're accumulating time.

Quote

"Budgeting isn't about spending less. It's about deciding what your money will do before your money decides for you.

Action Step

Today, calculate one number:

How much does it actually cost to be you for one month?

Then divide your current liquid savings by that number.

That's your current financial runway.

Once you know it, start deciding how many months of freedom you want to own.


-Guillermo.