Securing your future
Have you ever taken a large withdrawal from an ATM machine, then found your-
self the following day nearly out of cash and unable to reconstruct exactly where
you spent it?
Buy now, pay later is a popular incentive when it comes to home furnishings,
electronics and automobiles. The plastic charge card slides in and out quite
smoothly when we make our purchases, and usually we don't think twice about
funds spent when signing the receipt. Then we have 24-hour banking systems that
robotically answer most of our money questions. And, with all of the purchasing
incentives and banking features available today, unfortunately we’re completely
out of touch with our money. |
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Exercise
How in touch are you with your money? Do you have any idea what it costs you
to live each month? Think carefully, then write down your own answer below.
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We’re willing to bet the ranch that most of you believe (or deceive yourself into
believing) that you need about $1,000 to $1,500 a month less than you actually
need in order to continue to live in the exact same manner you live right now. In
other words, if you think you need $3,000 a month, more than likely the real figure
will be $4,000 per month. If you think you spend $7,000 per month the real figure
could very well be closer to $8,500 per month. Not knowing what it actually costs
to live each month leaves you vulnerable to emergencies. And one of the reasons
could be that your “planned spending” does not include expenses that are not
billed on a month to month basis.
For example:
- If you belong to a gym do you consider this cost per month even if you pay
your renewal fee once a year?
- Do you wear disposable contact lenses? That could be an extra $40 per
month for lenses.
- What about your automobile insurance? Do you pay that twice or four
times a year and if so, is the cost calculated into your monthly expenses?
- Did you take into consideration vacations, birthday and anniversary gifts,
pet, medical, holiday, automobile maintenance, college fund, and other
forgotten or miscellaneous expenses?
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Where the Money Goes Exercise:
In order to do this exercise you will need your canceled checks, ATM statements, credit card bills, cash receipts and whatever will tell you how you spent your money over the past year. This information is more revealing than a diary. They contain the key to how you live your life. |
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Record every penny spent in each category -- such as your telephone bill, auto
maintenance, dry cleaning, vet bills, utilities, gas etc. If there is an area that does
not pertain to you, for example alimony/child support, then leave this category
blank. This exercise will take some time to do, but think how much insight you’ll
gain by knowing where your money goes exactly!
- After all the categories are filled in for each month, tally up all months
individually.
- Then add together all monthly totals together to get your "grand total."
- Take your grand total and divide by 12. This will give you an average dollar
amount that you spend each month.
Remember, these are average figures. For example: Lets say for 8 months your
average living expenses add up to $2,500 and for four months your average
monthly living expenses add up to $4,000. Your grand total yearly expenses is
approximately $36,000. In order to meet your expenses, you will need to bring in at
least $3,000 per month.
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