Well the new year has rolled around once again and you find yourself in the same place you were last year at this time - broke and living paycheck to paycheck. Are you tired of being broke yet? If not, then stop reading now and don't even bother with the rest of this article. If you're still here, then I have a few things to say to you. If you're like me, at some point in your life you will get sick and tired of being broke. When you reach that point, you need to make a promise to yourself. Promise yourself that you will do what it takes to get on top of your financial situation this year.
Are You Sick of Being Broke All the Time?
Let's face it, having no money is a very stressful way to live. You know you're broke when you have to buy another $900 car this month because it's really all you can afford. But you know that it's eventually going to break down after just a few months, and then you'll have to scrape together another $900 to buy your next crappy car. You know you're broke when your tooth starts to ache because of that cavity you couldn't afford to fix last month, you pray that the pain just goes away because there's no way you can afford to go to the dentist. And what about that job? Do you really think 8 bucks an hour is good money?
Wouldn't it be great to walk into a store and buy something without having to even know how much it costs? What about being sure you can pay your bills every month and know there is going to be some money left over to have some fun with? How about going on a vacation that is already paid for before you leave town? Hey, remember what the inside of a new car smells like? You know that more money means more options for you and for your family.
Time to Make Some Big Decisions About Money
You know, most regular folks who have money didn't just fall into it. I know there are a few trust fund kids out there, but most folks simply made a decision to change the way they think about money. They started cutting back and researching before they made decisions on what to buy, or did without some things in order to save some extra money. Some folks simply know how to manage their money and that's the main reason why most folks have money.
If you're the type of person who always has to have the latest iPhone, best computer, most expensive car, or you just spend all the money from your paycheck by Wednesday or Thursday knowing you're going to get a paycheck on Friday. well you're never going to have money. If you spend cash without even caring where it all goes, then you're going to have to make some changes in the way you do things. If you're still with me, then let's look at some great ways to start cutting what you spend and start saving some real money.
A Word About Alcohol, Drugs, Porn, Gambling, and Other Addictions
Let me just say a few things first about addictions because they will affect your being on the most basic level. Addictions are nothing more than time and money pits that suck the literal life out of your soul. If you are addicted to something, and you're thinking that the addiction will never control you or hurt you. then you may be in denial. I'm not being judgmental here, you can do what you want. It's your life after all. But if you want to change your life, and get on with making some serious money, then I suggest you listen up.
Do some research and you'll see what addictions can do to people on a personal level and on a financial level. If you're already into any sort of addictive behavior, you already know what I'm talking about. When my Dad was getting ready to lay some serious stuff on me as a kid, he would say that we need to have a "come-to-Jesus-meeting." Well, you need to have one of these meetings with yourself. Be honest and determine if you really are addicted to something, and then figure out what it's costing you in time, money, and relationships. I'm not going to tell you anything else on this. You know if you need to change or not. If you do need to change, do whatever is necessary to get yourself healed and let's move on.
Start Out by Making a Plan and a Budget
You know that before you would even start a trip across the country, you would need to study some sort of map, and from that information, figure out the best route to get where you want to go. When you're on the path to making money, you do the same thing. Go and get a pad of paper and a pen, grab all your receipts from last year, find a quiet spot where you won't be disturbed, and start thinking about all the money you spent over the past 12 months. Look at your receipts and cancelled checks and come up with one number - the amount of money you spent last year on everything.
Next, get your paycheck stubs and come up with your next number, the amount of money you earned last year. If you made more than you spent, you're like most folks. But, like most folks, there won't be much of a difference between these two numbers. If your expenses are more than your income, then you're in serious trouble, my friend. The goal here is to get a real sense of just where your money is going. Look at all those receipts and cancelled checks. Where did all your money go last year?
Budget Cuts and Other Hideous Things You're Not Going to Like
So, you have an idea of where your money went last year. Let's start looking at some expenditures that might fall into the "I-should-have-never-have-spent-money-on-that" category. I don't know what is on your list so I'll share a few of the things that some other intelligent people have stupidly spent money on in the past. I know of one fellow who had more than 30 magazine subscriptions that were costing him about a thousand dollars per year. How about the family of five who ate out 10 to 12 times per week and would spend an average of $60 at every meal not including the tip. Or the
So where can you make cuts for the following year? Cut out that fancy coffee 5 times a week and make your own at home. Total savings: about $750 a year. Take a sack lunch to work instead of eating out five times a week. Save yourself about $1,500 a year. What about cutting off your cable TV? I can almost hear you gasp when I dare to mention it. You know, people lived on the earth for thousands of years without cable television and they seemed to do pretty well for themselves. With the average cable bill about $71 for a household, cutting Cable TV could save you about $850 a year.
Hey if you use coupons and shop for whole foods, not those prepackaged foods, you could save thousands on your grocery bill this year. What did you spend on clothing last year? There are actually people who just buy a few clothing items once or twice a year or buy their clothes at a thrift store. Hey, don't knock it until you've tried it. Some items in thrift stores are practically brand new, if not entirely new. Cutting here and there really does add up. If you cut just a few things, you could put several thousand dollars into your savings account by the end of this year.
Put an End to Over-Spending
If you've been studying those receipts and check registers, you should have a pretty good picture of your spending. As they say, if your outflow exceeds your income, then your upkeep will be your downfall. There are basically two ways people over-spend their money, The first is all those little expenses that don't really cost all that much by themselves, but can really add up over the course of a year. The second most common way people over-spend is spending way too much on big-ticket items like TV's, cars, boats, vacations, etc.
One friend I know makes about $250,000 per year. Now that's a serious income and you would think this guy would be having trouble finding places to spend his money. His mortgage is super high because he lives in a larger house than he needs in a fine neghborhood, he leases his luxury Hummer, Escalade, and his kid's cars, they all go on several cruises every year, and the kids attend the most expensive private schools in town. This guy is hard up for cash every month because he spends every dollar he makes. Mike Tyson earned over $300 million in his career and filed for bankruptcy in 2003 still owing about $27 million.
Don't overspend your money. Make a budget for your money and stick to it. Another family I know who don't make near that $250,000 a year salary, actually manage to get by on just about half of what they earn. The rest they save, put toward retirement, or invest. They're doing well because they have a plan for their money.
We'll discuss more ways to cut costs and save even more money in our next post.