Do you need a Money Diet?
Despite the current economic conditions and the credit card problem in our society, people continue to spend with wild abandonment of the reality of what they are doing to themselves. The October 15th deadline always brings out the worst of procrastinators, and the main reason is that they all owe huge amounts of taxes that they should have been paying throughout the year. They need a Money Diet. It’s time to scale back and make some changes! Here are a few clues to tell you if you need one…
Do you spend every last dime you make, no matter how much you make?
When you get a raise, do you simply increase your monthly spending accordingly?
Have you paid off a vehicle, and instead of using those funds to pay down a credit card, you go to the store and buy more shoes (or whatever your vice is? )
Are you house poor? Did you get caught up in the idea of the house and now you have a payment, maintenance and repairs that are keeping you from having any fun?
Are you keeping up with the Joneses when it comes to having fun, because I can tell you – that’s not fun. The stress of keeping up with your neighbors takes all the enjoyment out of having that luxury item to begin with .
What can you do about it? It’s actually pretty simple, and you don’t have to be great at math to figure it out. Here are the solutions in reverse.
Simply do not keep up with the Joneses! Buy the luxury items that you truly enjoy and set your ego aside. It’s only our ego that makes us overspend to keep up with or impress our neighbors. Allow yourself to enjoy the luxuries by staying at a price you can afford. And remember, it’s not just the cost of the item, it’s the upkeep that hurts people when they get in over their head.
Take a look at your house and make sure your total expenses don’t exceed 30% of your income. Don’t be afraid to downsize! The housing markets are up in a lot of areas and I have had quite a few clients do this and they still had a great home, but a lot more peace of mind to go with it. I have friends who have done this as well and are happier than ever!
If you pay off a vehicle (or something else), then take 1/3 of the monthly payment that you no longer have and put it into your short term savings, then split the rest between paying down a credit card and having fun with the rest. Yes, you can have fun! Just take care of the savings and debt too. It’s all about #balanceyourspending.
When you get a raise, refer to the above and split it up pretty much the same way. There are more variables here, but in general if you get a standard raise then save more, pay down more debt, and have your fun after that. Trust me, your fun will be a lot MORE fun if you do this!
If you are spending all your money every month and you are not paying your taxes and saving, then you will do that no matter how much you make. It happens all the time. You must start these habits at whatever income you are at, and no matter how little you set aside, you will be establishing that you are able to. That’s what is most important. It gets easier over time when you see even little amounts adding up to significant totals.
This is a great time to go on a Money Diet with the holidays. That’s when everyone spends the most money and feels the worst about it. So just like you don’t want to wake up in January with an extra ten pounds from all the holiday food, you also don’t want to start 2015 in debt!