Make The Most From The Money You Already Earn

Mon Feb 23, 2009, 12:02 am | 1 Comment

Lately, some financial news suggest that many folks who were big spenders six months or a year ago have been managing their money more wisely. One well-known family financial counselor wrote, “Managing your money may well be the single most important thing you can do today for yourself and your family.”

The United States is a nation of abundance in every respect. Money, here in the U.S., used to go on trees, so we thought, especially someone like me.

As an immigrant, that is exactly what I and everyone else I knew thought the same back when I first came here in the 1970s. Little did we know that we had to work hard to earn a living.

Some earn well but end up as paupers

We may learn to earn increasingly more money, but can still end up as paupers. We have to become wise money spenders as well. We have to change our mindset to save and spend less. Studies show that even those individuals who earn big salaries still feel financially strapped.

Some folks’ needs are others’ wishes. Americans have not lived in a third world country – they don’t know what hardship people go through to earn $2 a day, even that is a luxury these days.

In many cases, people back there live on less than $2 a day, working 7 days a week, 365 days a year. They never heard of vacation. They can only look at the meat in a butcher’s shop. When they pass by, they put a hand on their kids’ eyes so they don’t look at the meat.

Americans are blessed

Americans are blessed, as if you didn’t know, with an abundance of natural resources. At some point, folks got carried away. They probably thought those resources are unlimited. We know now and have realized for some time that they are not limitless.

However, having said that, folks here have worked hard over the years for what they have achieved in any field – you name it, Americans have done it. Besides, we, as a nation, have given so much to the rest of the world.

It’s just that we need to manage our finances. Sound money management teaches us a basic financial conduct. We must remind ourselves there is never enough money for everything we might want or need. So we need a sensible spending plan.

Plan spending

These days, when we as family, go on a trip, we go online and map out the route using Google maps. So we know what route to take, how long it will take to reach our destination.

A spending plan is like a road map. A budget helps us arrive at our financial destination, safe and sound. Every business and government must have a spending plan and must strive to follow it.

Such a plan guides the effective use of money in many ways. They are simple to follow and to follow them, we must take time to understand them. It helps us:

• Live within our means

  We must figure out whether we can afford a merchandise that we so desperately want. A plan gives us greater control over our financial resources. We can immediately know whether something we desire to purchase is affordable. So affordability is a must to understand and realize.

• Realize personal goals

  If you plan a budget, you must know, then, how much money is coming in every week or month (cash inflow) and how much money is going out (cash outflow).

  That way you would be in a far better position to cut down on your expenses that you thought you desperately needed but in reality, you did not. Then and only then, we can address to solve our debt problems, accumulate savings and save for the future. So setting personal goals is a must to understand and realize.

• Spend money effectively

  Merchandisers know that shoppers make spur-of-the-moment purchases. That’s how they are trained to know. For example, items on the supermarket counters are often positioned in such a way as to encourage purchases. So spending money effectively is a must to understand and realize.

If you don’t know where the money goes, you won’t know where to get it when you need it the most, for example, in the following situations:

• Emergencies

  We should put money away each month for somethings we hope they don’t happen; but they do happen – circumstances such as car and house repairs or God forbid, hospital stay.

• Periodic bills

  Put away money each week, month or pay period for a future bill such as insurance or taxes. For example, if you pay an insurance bill once each year, put away one twelfth of the total in your savings each month.

• High-cost items

  Don’t buy that new HDTV today. Each month put money into a savings account. Buy it for cash or make a bigger down payment so the monthly installment would be more manageable.

  If you buy the TV for cash, you would be paying on your terms – without interest and at the most financially appropriate time, such as during a timely sale.

In a Nutshell
A spending plan helps us to avoid impulse buying. We buy only what we planned to buy and only those things our plan tells us we can afford.

A spending plan helps us to ask the right questions about our money.

• Is this the time to buy this product?
• Would we rather have this product than something else?
• Does it fit in with our goals in life?
• Do we have the money to buy it?
• Is this the most economical way to buy it?

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