21 Dec How to Manage it All
One of the greatest stressors of life is managing our money. A study I read a few years ago said that 90% of couples who were divorcing said that money was their number one problem. However, the average income of those couples was significantly above the poverty line. This suggests that it’s not necessarily how much we bring home, but how we manage it that’s the problem.
We are being marketed to death. Everything around us, from television and radio to printed material and the internet, tells us what we need to have and how we can get it whether we can afford it or not. In my experience the ease of living at a higher lifestyle than we can afford is our biggest challenge.
Statistics show that we spend 26% more using credit than using cash. That means we will spend 26% more than we can afford using credit. This unfortunately is a slow process that catches us off guard. No one goes out one day and sees how much debt they can accumulate. It foes from one credit card that is not paid off monthly to another, to a loan consolidation, to 100% car and home loans where no equity is built, to a place where we are truly a slave to the lender. And this happens because there has been no planning and the money runs out before the end of the month.
We have to have a plan to take control of our finances. Most of us at one time or another have sat down and scratched out what we are supposed to spend each month. The problem is we just put that in a drawer and are surprised when we overspend at the end of the month. We must take that initial framework another step and have a tool that is active throughout the month and will tell us when we have spent our last dollar in an area of spending so we know we can’t spend anymore until next month.
The basic principle of an effective budget is based on the old “envelope system” your parents or grandparents may have used. They would take their paycheck and cash it and have envelopes for each area of spending, i.e. Housing, Automobile, Food, Clothing, Giving, Savings, Entertainment, etc. When they went to the Grocery Store they took their Grocery envelope and paid for their groceries using only the money from that envelope. They went home and put the money under their mattress (which I don’t recommend) until the next time when they took that same envelope. At some point that envelope was empty, which told them they had to wait to buy groceries until next month. They would do this with each area and it kept them current on their bills and out of debt.
This principle can work with modern-day checking accounts and debit cards if there is a written plan of budget figures and actual expenses documented. There are excellent budget books at the local office supply or you can use one of the newer computer programs. Both require consistent tracking of expenses throughout the month. With a little time you can take a lot of the stress out of life and not allow your money to control you.
By Brent Sharpe