Who’s driving your money?

When driving your car you routinely glance at the fuel gauge, check the speedometer and the odometer. This information helps you decide when to re-fuel, when to adjust your speed, and how much farther you have to go. Managing money similar to driving a car, but most of us pay more attention behind the wheel than with our finances.

Think of your bank account as your money tank. The balance is the number that confirms how much money you have available. Just a gas tank, an account balance goes up and down, sometimes several times a day. This is because of the increasing use of cashless money transfers using automatic deposits and withdrawals.

However, if you withdraw more funds than are available the account will run dry. Just like with running out of gas on the highway, there are costs to get your bank account going again. With a car, it’s the tow truck or highway assistance. With a bank account, it’s the overdraft costs. In either case, you are stuck until you take care of the problem.

If you drive too fast you risk losing control of your car or getting a speeding ticket. Accidents and speeding tickets both cost extra money and inconvenience. With money, it’s up to you to decide when you’re spending too fast.

However, with a bank account there is no built-in speedometer to warn you to slow down. This is where most people take their eyes off their account and just keep spending.

It takes some time and effort to figure out how much money is coming in and how much is going out your account. However, the fear of actually knowing the true financial picture keeps many people from looking at the numbers. They believe it’s easier to just keep spending and hope the numbers work out in the end.

Managing money is like taking a long journey. You want to have enough to get you where you want to go. You want to avoid detours and problems along the way. Fortunately, it’s possible to break your money journey into small trips so that you can easily track your progress.

With money, we can look at numbers in a monthly time frame. We can calculate total inflows and expenses. These evaluations help us see how were doing so we can see where to make adjustments to keep the tank from running dry.

For most of us money is the fuel for our long journey with many years of earning money with the expectation of a comfortable retirement. You can gauge your progress by looking at how efficiently you use your money.  To this end you can make the most of your money by following four simple rules.

  1. Pay all bills on time to keep your credit rating sound.
  2. Reduce or eliminate credit card interest by paying the full balance monthly.
  3. Avoid late fees and overdrafts by planning your spending.
  4. Save and invest money for retirement

Ayn Rand, author of Atlas Shrugged, said, “Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” In order to be the best driver of your money, you need to look at the numbers, early and often.

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