Financial Fridays / Money Matters

Your Money…and the truth

Your Money… and the truth (Philosophy)

It’s been said that “the truth will set you free.”  I agree strongly with this statement, but with a slight modification, the truth will set you free after it pisses you off.  In the world of money this may be a truth you need to come to terms.  Getting ahead financially is not about sticking your head in the sand and living ignorantly paycheck to paycheck, but being proactive and understanding your spending habits.  Unfortunately, to do this takes one uncomfortable step; budgeting.
Budgeting is so frustrating…WHY?

Because you simply spend what you make and there is no money left at the end of the week (or month) to get ahead.

Too much month at the end of the money as they say

We trick ourselves into believing that more money will solve everything.  It becomes our plan to push off budgeting and financial planning until we get a raise, a new job, or win the lotto.  It’s hard to believe, but this will not solve the problem.

Studies have shown that if a person habitually spends 50% of their paycheck for example when they make $50k per year then they will also spend 50% of there paycheck if they were to earn $100k per year. The  amount of money they earn does not matter its the spending habits that are in place that make all the difference.

So what will solve our current money problem?  YOU. You must master your money by knowing how to live on and handle the money you currently make.  This is done by designing a budget and sticking to it.  
Other truths: budgeting is boring, takes discipline, and many doubt its importance.

However, all money success builds on this foundation.  So once you accept this truth the are some key steps that need to be taken to implement it.

The life changing  exercise:

Step 1:  figure out how much money (after-taxes) you have coming in each month

Step 2: plot your monthly spending habits by item, date, and  amount

  • Including calculating rent, cable, insurance, gas, food, cigarettes, and everything else you spend money on.
  • You also must know the dates your bills are due and track your cash flow.
  • The blueprint must make up 100% of your spending.

Step 3: live within your means. Ideally, your income should match (or preferably surpass) your spending.

Budgeting takes discipline.  However, having the willpower to do this sets the foundation for a prosperous financial future.  It sounds simple but everything that is simple to do is also simple not to do but if you can do this you have taken the first, most important, step towards financial freedom.

Austin Kelly, MBA

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