by Brice Hogan
I talked to a friend of mine recently who has a brother who he talked to over the Christmas season. They were chatting over how much he overspent for Christmas. He had mentioned to my friend that he had a lot of pressure to buy the coolest new thing which happened to be a video game for X-box and some other things to accompany it for his son. I cooked some dinner for my wife’s family and my brother in law was going out to dinner later that evening with his in-laws at the expense of a buffet a dinner which he admitted that he did not have the money for, he could have just stayed and not spent anything.
We are all often caught in this trap of appearances. “I need to look good for the neighbors.� I need to spend X amount of dollars for my son on the newest toy for him to play with that will eventually get shelved. We do this a lot in our society. It is a society of appearances and that is what gets many of us into financial trouble. The keeping up with the Joneses Syndrome.
How in the world do we avoid this? It is very simple but for some very difficult to put into practice. You must decide to be wealthy. It is as simple as 4 words “decide to be wealthy.� The mindset is the most important thing. Without it you will go nowhere. Most wealthy people have a certain set of habits that they live by I will share 2.
1. Track Your Spending (know where you money is going)
Few wealthy people live extravagant lives, but the fact is they are pretty normal. They don’t drive expensive cars, or own expensive clothes they drive used cars and wear discount clothing. They also know where their money is going at all times. A family is much like a business. At the end of the day your family wants to make a profit have more money at the end of the month then they did at the beginning. There are a number of different ways of tracking your spending. The simplest is to write down everyday what you bought, from what store or what it was for, if you used cash, credit, check or debit, and the date. Also keep track of you income. So at the end of the month you know how much you have left over or how much you have spent over. You can use a spreadsheet to enter this information or a ledger book what ever is easiest for you to use. Just be sure to track everything you spend.
2. Live Within Your Means.
Once you know, and this will usually take a month or two of tracking your expenses, where your money is going you can start to cut down your spending in those areas in which you were over spending. These places are usually easy to identify. Usually the following areas where we over spend are:
Eating Out everyone does it, however most people do it more than they should and spend enormous amounts of money that they could be saving or using to pay down debt.
Other areas most people are guilty in overspending are; Entertainment, Groceries, Insurance (Life, Home, and Auto). You can usually tell where you spend too much in. Just follow the money. The main thing here is to live with in your means try to live on 15%-20% less than what your actual income is. Generally this is called the 80/20 rule which says that your spending should consist of 80% of your monthly expenses and the other 20% of paying yourself and charity causes.
If people would just follow just these two rules, less people would be in bankruptcy and have more saved for productive purposes. The most important thing is psychological don’t let appearances convince you to spend more than you have if you follow this rule you will always come out on top with your money.
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