techsenseonline

What if I told you that a colleague who earns the same pay with you has more money than you do? Not that he has other income sources, but because of prudence in managing his finances.

Kiyosaki, in Rich Dad Poor Dad spoke about the rat race – the vicious cycle that make increases in income eventually erased by increases in expenditure. Expenses rising up to meet income, a situation most people are guilty of.

Those who have managed to get their finances in order have evolved means of checking ‘excessive’ expenses. I’m not talking about a credit card limit, because the use of credit cards for purchasing is financially unhealthy – spending money you haven’t earned.

Why Manage Your Finances

The law of cumulative advantage best explains the concept of “the rich getting richer and the poor getting poorer.” Not everyone desires to have the size of Bill Gates’ wealth, however, staying ahead of the bills is a worthwhile financial goal.

If you find yourself in recurring debts, you will appreciate every move to remain financially afloat. Apart from not having any income source, the next major reason for debts is financial discipline. The discipline to let go of the things that are not important.

Managing your finances means drawing up a financial plan, and sticking to it so that financial goals are met. Proper finance management reduces wastes, ensures bills are regularly met, and savings for the future.

The concept of The Crumbs Account

The crumbs part of the account is not much different from the crumbs obtained from food. The major difference is in the way they’re handled. The crumbs from food are thrown away while those of the other are gathered together.

Crumbs account is a savings account for keeping left-over money. Let me illustrate with an example. Dave works in a media outfit where he earns $24,000 annually ($2,000 monthly). His monthly budget is listed below:

i. House rent – $400

ii. Feeding – $150

iii. Transportation – $100

iv. Insurance – $180

v. Energy bills – $75

vi. Church giving – $100

vii. Cash gifts to parents – $100

viii. Contingency – $395

ix. Savings – $500

Some of the items in his budget are fixed. Others may vary depending on circumstances. If at the end of the previous month, Dave spends $137.50 on feeding, $80 on transportation, $68 on energy bills and $180 on contingency. Instead of spending $720 on those items, he spends $465.50 – a difference of $254.50.

The difference of $254.50 will be deposited into the crumbs account for that month. This excess money is a result of spending less than the amount budgeted for monthly spend. This is a simple way of re-investing funds not used.

As simple as using crumbs account seems, some work has to be directed into it to make it work. These are:

1. Taking time to sit down and draw up a budget.

2. Living within your income.

3. Only those items that are important qualify for a place in the budget.

4. Reduce exposure to unnecessary adverts that may prompt you into increased spending.

5. Discipline to stay true to the budget.

6. Recognizing that the money saved as a result of financial prudence belongs to the crumbs account.

7. Setting up a crumbs account that accrues some kind of interest.

Crumbs account is an efficient means of managing finance for the individual, corporate organization, NGO and governments. The next time you find yourself with some leftovers, you might just be holding on to the next deposit for your crumbs account.