This time of year is crowded with lists, ambitions, goals and resolutions. I’m a huge advocate for written goals. I’m also witness to far too many individuals abandoning their New Years resolutions and commitments simply from being overwhelmed in the enormity of new tasks to tackle.

I have one action item to recommend. And, by doing this one action item, you will benefit from the residual effect it will have on every area in your finances.

Have a clear picture of where every dollar is going. It sounds simple. You’d be surprised in how many individuals and families utilizing psychic banking – they try to track everything in their head, having only a vague idea of much money is being allocated (spent) in various places.

How much do we spend on dining out? Grocery shopping? Entertainment? How about impulse buying? Many would have approximates, but seldom have exact numbers.

What happens when you actually visualize where all the dollars are flowing? For some, myself included, your jaw may drop as reality hits you upside the head. When you see the amounts flowing out to various areas it then becomes much easier to take charge and deliberately re-allocate some of those dollars to where they will be more beneficial.

For example, if I notice that the money we are spending on dining out is higher than it needs to be, and I ask the question, “Can we survive if we reduced our eating out budget by $100 per month?”, and we collectively answer “Yes”, then we re-assign that $100 into an area that will improve our financial health; increase savings, investing, or giving to worthy causes.

As you look at the areas which I refer to as variable, you’ll see that you have a lot of control as to how much money is expended. Cable bills can be renegotiated or eliminated. Cell phone bills can be reduced; forms of entertainment can be adjusted to be more cost efficient.

When you have a clear picture of where your money is going, you are in a better position to initiate positive change, and re-direct your dollars to areas that are of higher importance.

For more help with cash flow management, pick up a copy of Against The Grain, Avoiding The Pitfalls of Conventional Wisdom  here:

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