I’ve found that learning to live
fiscally wise is like learning to live healthy. Crash dieting doesn’t work and neither do get rich quick
schemes. What works is a total
lifestyle change. In dieting, it’s
learning to develop a health conscious mindset and implementing that mindset in
the form of healthy eating and exercise.
Allowing yourself the occasional piece of chocolate cake or pint of beer
but knowing it’s all in moderation.
The same goes for spending. We need to develop a mindset that
defines our true necessities and make sure our spending is in line with what we
actually need and value with splurges like going out to eat and drinks in the
city in moderation.
There’s
an interesting book called The Millionaire Next Door by Thomas J. Stanley. In it, the author takes a close look at the lifestyles and
spending habits of millionaires.
Millionaire being defined as someone whose net worth is over one million
dollars. What he consistently
found was that with the exception of a small percentage, the millionaires lived
fairly simple lives. Instead of
leasing the latest car model they typically owned their vehicles for long
periods of time. They didn’t join extravagant
country clubs with exorbitant fees.
They sent their children to good public schools, rather than expensive
private schools. You get the idea.
Note that millionaires are not
defined by their income but by their net worth. In other words, all their assets (home equity, stocks, cash,
artwork, etc) minus all their liabilities (credit card debt, student loans,
etc). You can have a six figure
income and be netting zero, and conversely, you can have a modest income and be
a millionaire. The lesson is that
those who live within their means and plan for their financial present and
futures are those with the greatest net worths.
These
millionaires have mastered the finance diet; finding a lifestyle that balances
the necessities and luxuries through financially profitable AND financially
scarce times.
Just
as keeping a food journal can keep you on track for weight loss so can writing
down your spending. Once you’ve
got it all down on paper you can see where it’s going and assess whether you’ve
“oversplurged” on some luxuries or whether you need to save more to pay down your
debt or whether your shopping habit is keeping you from reaching the financial
goals you’ve laid out for yourself in $$$
Dreams (post from October 29th).
The
following is a list of online resources that can help you track your spending
and develop a budget. You can even
link your bank and credit card accounts to many of these sites so that they
automatically track your spending for you. Just be sure to manually input your cash purchases. Bonus: All these services are free!
-
Mint.com
You can also chose to keep track of
your spending on a simple spreadsheet.
With this method you can customize your spreadsheet to your specific
budget plan. I will be offering customized spreadsheet and budget templates for those who don't feel comfortable sharing their banking information with a website. Email here for more information.
As we approach the
New Year and the time for resolutions, let’s remember that diets aren’t only
for waistlines and that a little adjustment in spending can mean a big payoff
in reaching financial goals.
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