Avoiding Financial Madness

Brian Watson, CFP

Every month you have income and expenses. Life gets so busy that where your money goes can get blurry after a while. One of the best, and also most basic, ideas is to make a budget. Now don't let the word budget scare you. Sometimes people have a mental roadblock when they hear the word budget. 

All you have to do is make a list of where you spend your money every month and then write in an amount every time you make a purchase. Things like groceries, mortgage payments, and car insurance are obvious. Don't forget about haircuts, eating out at restaurants, and other spending money. The point of all this is for you to understand that each and every month you make a conscious choice to pay everyone that is on your list INSTEAD of paying yourself. Think about it: you work hard to earn an income, and then every month you send that money right out the door to various stores, restaurants, and other services. Now I'm not against enjoying life, but you must understand that when you say yes to spending money somewhere, you are saying no to saving that money for your future financial security.

Once you have gone a month or two with your budget, it is time to make some hard decisions. Is it more important to you to spend $300 each month at the mall instead of putting that money into an account with your name on it? Go through each expense and ask yourself that question. It will become apparent what expenses are worth continuing, and which expenses are not as important as your own future financial security.