| No matter how much we
want to follow such a valuable plan, many of us, for some unknown
reason, are unsuccessful in reaching these important financial goals.
It’s like you just want to shrug your shoulders and be done
with the whole thing. But it is not that light of a matter to be brushed
aside. If we don’t take on such a plan now, then many of us
will continue to go through life regularly worrying about our financial
health and not being prepared for what the future may hold.
A few years ago, after I accepted my first job working
in financial services, my dad gave me a quick, financial tutorial.
He created a budget that included all the necessary expenses I could
incur and was so kind enough to include the lifestyle expenses I might
rack up from living in a city: dinners out eat, shopping, expensive
haircuts, cab fare, Starbucks, etc. In my mind, what my father called
“lifestyle” expenses I called “necessary expenses.”
Studying my budget with him, I saw the potential
to save lots of money. I remember thinking that I was going to be
young, rich and fabulous! “And it’s so easy! All you have
to do is stick to this plan,” my father chimed in excitedly.
Sitting there, in my parents’ house, it all seemed so manageable.
If only I had adhered to The Plan!
The tips my father gave me are now part of the distant past and I
am back at square one: young, fabulous, but not rich.
How do we go wrong?
My approach is what went wrong. As I mentioned earlier, the budget
drawn up by my father seemed so manageable and I felt confident in
making it happen, but I took the wrong approach to implementing my
budget. It’s like when I turned 24 and decided to run a mile
everyday. I wavered a bit and ran one mile a few days a week. My birthday
resolution was quickly abandoned altogether and I haven’t really
thought about it since. And that’s exactly what happened when
I moved to Philadelphia (budget in hand): I wavered, put it on my
bookshelf and didn’t think about it after that.
Of course we all say we’re going to do things
and falter here and there, but eventually we create order. While I
didn’t stick to my original plan of running, when my 25th birthday
came around, I made a realistic resolution that agreed with my schedule
and made sure I followed it immediately. From this simple self-reflection,
I saw that I had the desire to run regularly, but for some reason,
did not make it the habit I had intended to. I realized what I needed
to follow through with my resolution was inspiration and a firm approach.
And now, after few years of working and seeing where
my money goes, I am using these realizations to get back on track
to create and use a budget for myself.
Adopting The Plan
Everything we do in life involves some goal or objective. If we go
to the movies, it’s to be entertained. If we go to medical school,
it’s to become a doctor. We work to gain experience, utilize
our skills, and earn money. We don’t just want to earn
money, we also want to save it. But it’s tough when you live
in an urban environment with all of your friends nearby. No matter
how hard you try to save, it just becomes a fruitless effort and you
aim for the next month to start again. Let’s break that cycle,
step-by-step.
1) Create a budget. Hate
to say it but this is a must. You can’t decipher your financial
situation unless you know what you have. First, write down your expenses,
including necessities and lifestyle expenses. Next, add up your expenses—all
of them! Then, assess your situation and find places you can cut back.
Write the new list of expenses, your income, and how you are going
to allocate your expenses from your income.
2) Find your inspiration to save. I like
to travel, so my inspiration is to save money so I can travel more
often. If you keep your goal insight and remind yourself that some
penny-pinching in the short-term will lead to rewards in the long
term, you will be more motivated to save.
3) Discover where your money is traveling.
My approach is to take my money seriously and pay attention to how
I spend. I step back to take note of where I hastily spend money that
I could sensibly save. Through this process, I cut down on cab fares,
grocery expenses, and impulse buys.
4) Balance your checkbook regularly. It
makes a world of a difference to actually see where your money is
going.
5) Investigate free sources of entertainment.
Watch for free concerts and events in your city by reading the city’s
paper or checking Craigslist.
6) Shop selectively. Treat
yourself to some of the finer things while cutting back elsewhere.
I visit the local Whole Foods to purchase some of my favorite organic
items, which get pretty expensive. To save money, I buy the specific
organic items I enjoy from Whole Foods, and then visit the regular
grocery store for other staples.
7) Handle your credit wisely. Stay on
top of your payments. Even if you can only make the minimum, pay it!
You don’t ever want to fall behind on your credit card bills.
Also, watch your credit report.
8) Create a retirement fund.
Contribute the maximum amount you can to your 401K or 403B retirement
plan. It’ll hurt now to see a decrease in your paycheck, but
think about the wonderful things in life you will be able to enjoy
after you retire because of this important early contribution.
Once you implement The Plan, keep it somewhere you
will see it regularly to ensure that you will stick by it. The goal
is to put your plan into action. You can do it!
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