Updated: Nov 20, 2022
Have you ever bought something, and afterwards felt a knot in your heart because you shouldn't have?
As a bookkeeper, I've had the opportunity to see the finances of some wealthy people, and some people who pretended to be wealthy. In both instances, the money came in; but for one group, it left their bank account almost as soon as it came in, which led me to start asking myself: "What are those people's true financial capacity? What is MY TRUE financial capacity?"
Before going further, let me describe to you what I mean by Financial Capacity: it's
the most amount of money we can maintain in our bank account for at least three months while still functioning comfortably financially.
We don't all have the same financial capacity. So, to determine what yours is, go back to a period of your life where you were financially comfortable, and check to see what was the most amount of money you had in your bank account, but most importantly, how much of it were you able to retain and for how long?
Was it $100? Was it $500? $2,000? $5,000? $10,000? Now, look at your banking statements for the past three months to see how much money you were able to keep in your savings account. Has that past amount increased or decreased? If it has increased, CONGRATULATIONS on breaking your financial ceiling and increasing your financial capacity. If it has decreased, no need to panic. I have been there, and this is how I slowly started increasing my financial capacity again.
First, I reviewed my most recent bank statements to not only see where my hard-earned money was being spent, but also to get a better understanding of my relationship with money.
Second, I started itemizing my expenses. I won't lie, I felt a little ashamed for some of my frivolous spending. I realized that I stopped holding myself accountable for my finances, and that's what led to this.
Third, since I identified the unnecessary spending, I started being more conscious of my daily habits and started ignoring those urges to buy things that are not on my budget. By exercising good stewardship towards my money, in a couple of months, I was able to slowly increase the amount of money I kept in my savings.
As I said before, we don't all have the same financial capacity. But what causes most of us to get off track financially is either to adopt a state of mind where we fail to properly budget the amount of money needed for our monthly expenses and entertainment, or we live in a constant state of justifying our poor money habits with excuses. Neither state of mind is healthy and keeps us from being prepared for life's emergencies and building wealth for ourselves and for the next generation.
To conclude, I can tell you, as you start your journey to increase your financial capacity, it will get harder before you get the hang of it. But throughout the journey, you will rebuild trust in yourself regarding your finances. And as an added bonus, next time you want to buy something, instead of feeling that warning knot in your heart, you will have the freedom to say: "I can truly afford it".
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