Grabbing the Reins
You've decided it's time to take control of your money. Bills keep piling up, creditors incessantly call, and now you know it's time to start. Sound familiar? You aren't alone. Over fifty percent of Americans have some credit card debt. The housing crisis still isn't over. The unemployment percentage hovers around double-digits. Many of us need to grab the reins and find a plan.
Where to begin, though? How do you start turning pennies into dollars, and dollars into ten dollar bills? Here's step number one:
Let's get the word out the the way. The dirty "b" word.
Yuck. A budget feels like work, doesn't it? It's nails on the chalkboard. It's the singer missing the high note. A budget seems like hours sitting over a spreadsheet, tracking every box of macaroni and cheese, every stick of gum, every coffee.
I don't like that type of budget either, so let's change the terminology. You need to change the language to change the behavior. I'll propose a new approach. We should start with the job you're trying to complete. You're trying to practice well with your money so you have funds when you need it. We should use a phrase that conjures up the image of taking control, practicing great habits, and achieving your dream.
Instead of a budget, let's talk about a money plan.
Much like a play well performed or a song well played, I like the practice that makes a money plan perfect. Simply put, a good money plan creates successful money performance. It creates the standing ovation from your wallet that you're looking for when you practice and perform well. There isn't room here to detail the entire plan, but here are some important steps:
1) Write out how much money you earn in a month. Be conservative. You'll need to be able to live through those tough months when money isn't coming in.
2) List the expenses you can't live without. Financial planners call these "committed expenses." We'll call them rent or mortgage, basic groceries, utilities, and costs associated with your work, among others.
3) Now write those expenses you can live without, but currently enjoy. Financial planners call these "discretionary expenses," but we'll just call them gifts, cable television, eating out, and other "lifestyle" expenses.
Now here's the fun part. Before we subtract your expenses from income, it makes sense to see if either of these areas can be improved, doesn't it? Here are some questions to ask yourself, to see if you may be able to save some money.
1) Are there ways to improve my income? I never know the answer when I ask a client this question, but, surprisingly, nearly everyone says "yes, I can." Everyone has a variety of thoughts on how they could earn more money. But before grabbing the first income-generating opportunity, ask yourself a more important question: "Is the way I earn more money going to detract from my artistic potential?" If so, search harder for ways to earn dollars that are congruent with your life goals. Don't create a money plan which is detrimental to your life plan.
2) Are there ways to lower my expenses? Most people begin by cutting discretionary expenses, such as coffee or ice-cream. Generally, this isn't the first place professionals look, because although there might be a few opportunities to save a dollar here, the large savings is nearly always in the committed expenses area. Can you somehow change your rent or mortgage situation? Are there opportunities to lower utility expenses? Do you need both the land line and cell phone? How often do you watch cable television? Comb through each expense and ask yourself if there is a method to lower some costs without damaging your lifestyle.
Once you've examined both income and expenses it's time to do some basic math. Subtract your expenses from your income. Hopefully, there's money left over. If not, it's time to really sharpen the pencil and ask hard questions about income and expenses. If so, you're well on your way to working your money plan. Stay tuned to our website for that topic in a couple weeks!
©2010 Abundance Bound, Inc.
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