Out of Money
Adam Horning No Comments

Does your money tend to run out before you run out of month? If your like many Americans that might be a common occurrence. It doesn’t have to be that way! Wealth is the result of increasing the difference between what you earn and what you spend, and developing a habit of setting some of that aside.  Most of us make the mistake of increasing our spending as our disposable incomes rise over time. This is self-defeating. If you do not develop an understanding and respect for money, it will always seem to slip away.

What’s Your Plan?

We call this a budget or spending plan. Budget is a four letter word to some people, but if you count the letters, it’s really a six letter word … like friend. If thinking about budgeting makes you slightly sick to your stomach, try thinking of a budget as your trusted friend.

This friend will help make sure that the month and your money expire at the same time. This friend will rescue you from the cycle of debt that traps so many people.

Has this ever happened? You are out of cash with almost a week until payday. You hit the ATM for a cash advance on your credit card so you can get by until the end of the month, or worse yet, you sign-up for a payday loan, plunging yourself even further into the vicious cycle. This is not a plan! This is a recipe for disaster!

Establish Goals

Goals are nothing more than a performance benchmark. Without goals, you have no means of measuring your progress.

For this reason, in the beginning, set modest goals. Just getting through the month with no borrowing is a real accomplishment. Remember—budgeting and planning are processes, not overnight cure-alls. When you master one goal, more aggressive goals can follow, like staring a plan to save for the future.

Understand Your Benchmark

Goals are nothing more than a performance benchmark. Without goals, you have no means of measuring your progress. Make  your goals meaningful and motivational.  Consider setting aside a few dollars for a celebration if you hit your goal and stay within your budget. That will give you the gratification of being able to celebrate your victory!   Or, consider adding those celebration dollars up over several months to create some extra dollars for a travel fund, and take that trip you have been thinking about with having buyers remorse.

Next Up

Living within your means,  or making the money you receive each paycheck last until the following payday, is only the first step. Accomplishing this critical first step requires making a budget and knowing what your short term goals are. But laudable as this may be, you are still living paycheck to paycheck.

You are making progress—you are living paycheck to paycheck on your own money rather than borrowing money and increasing your debt. What to do next? Next steps rely on how you define your medium and long term goals. That will take some thought. Consider writing those goals down, setting a timeframe for when you want to accomplish them, and posting them, either electronically, or a hard copy in a place that you will see often.

Maybe your end goal is an early retirement, traveling internationally, a large bank account, a dream house, tremendous wealth or all of the above. Regardless of your goal, you must have a plan, a roadmap to get you to the destination you have chosen.  And this is much more complex than drawing up a budget. Start by using some of these tips, regardless of what your medium and short term goals may be, and you’ll begin taking steps toward achieving future financial success.