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Money Is Like...

Your checkbook is like a gas tank

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What would you do if you ran out of gas? Would you risk asking for assistance from strangers? Would you call a tow-truck or AAA? Would you take a long walk to the nearest station and buy a gallon tank?

Most people have no idea what they would do in this scenario. The good news is that keeping gas in the tank is a fairly easy thing to do.  So when do you plan to fill your tank? Before the “Low Gas” indicator goes off? When the gauge touches the “E”? Or are you gambler and get it as close to vapors as you can possibly go? Maybe you are like the majority of Americans. You don’t really think about it but you do have an idea of when to go to the gas station. It’s a no-brainer, easy to do, and necessary to keep from running out and causing all kinds of havoc in your life.

Guess what? Your checkbook is like a gas tank. It has fuel (money) in it, you use it during the next week or two (pay bills, buy groceries, have fun), the level (balance) gets lower and lower, and you need to refill it before it runs out. What if you run out of money before your next payday? Do you risk asking for assistance from others? Do you call your bank? Do you take a long walk to the nearest payday loan station?

You always keep a small amount of gas in the tank so you should always strive to keep some amount of money in the bank. Tracking our expenses and just looking at the gauge (the account balance) once in a while should give the sense that we are right on track, when we might be able to go out and have a little more fun, or when we have to cut back because we are about to run out of fuel.

So this post is a challenge: Enter your purchases, paychecks, and bill payments into your checkbook every week for a month. Then see how far you can go before running on empty. Is there always something left over when you reach payday? If not, how can you get better mileage from your account?

 

If you can read box scores, you can budget!

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Photo by Piedmont Fossil

I am constantly amazed at guys that can read box scores and can tell you everything that happened, even if they didn’t watch the game. They speak in figures: Innings, At-Bats, Runs, Errors, all kinds of information that a novice fan would think was as complicated as Trigonometry (PS – I had to spellcheck that word).

So why do guys say that they would suck at doing a budget? There are so many similarities: Numbers, averages, percentages, goals, timeframes, and in personal finance there are only one or two players to be concerned with (themselves and possibly a family). A real sports fan could be excellent at tracking their spending (runs/hits/errors) and then lay out a game plan in the form of a budget (income and expenses).

It all comes down to caring. How can I say this with such certainty? Because I can look at someones Budget or even their Tax Return and find out a TON about who they are and what they do. But I could care less about who won the ball game or the On Base Percentage of fill-in-the-blank. If it were important enough then I would start paying attention to Albert Pujols’ .329 lifetime batting average (yes, I had to Wikipedia it).

The great news is we live in a society where you can get such information easily – whether it be sports stats or it is a budget spreadsheets with instructions (watch my video on how to create the Absolute Simplest Budget In Excel).

Yes, I know doing a budget is boring. But you can always add a category line item for Season Tickets!

 

Handling money is like driving a car

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Photo by Samcwill

You see, using a Budget is like a windshield – it allows you to look ahead, make safe course corrections, and enjoy the ride.

Using Cash is like using the side windows: You can quickly see what is happening around you, lower it when things start to get too hot, and raise it in case you need to protect yourself.

Using Credit

(credit cards, student loans, auto financing) forces you to keep looking out the rear-view mirror. The payment ALWAYS comes after you and is likely to cause you to crash.

If opportunity appears during your journey then you will miss it because you weren’t watching where you were going or paying attention to what you were doing.

PS – You will get farther (better mileage) when you stop making debt payments and the ride will become much more enjoyable!

Credit Cards are like Cereal

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How did we end up with so many?  We meant to have only one, yet here we are with more than we can handle.  How do we get rid of them?

This humorous look at our cupboards is a great example of how we end up with more Credit Cards than we said we would ever need and the BEST way to get rid of them!

A Calendar, A Budget, and a To-Do List

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Have you ever heard the saying “Your priorities are highlighted in your calendar and your checkbook”?  What you put on your calendar shows what you spend your time and effort on and even a stranger can tell what your priorities are from looking at the activity in your bank account.

Leave something off of your calendar and it could cause problems.   Example:  I had forgotten to write my best friend’s wedding anniversary on my calendar.  I was talking to him on the phone that very day but didn’t realize it until three days later when my wife had asked if we sent them a card.  He was very forgiving but, really, how embarrassing!

That lesson re-emphasized the need to write things down.  Everyone can tell you that creating a grocery list is not only efficient but helps you get out of the store faster (and lighter).  And taking notes during a meeting turns the short-term into a long-term memory.  And who would say that you’re wasting your time with a “to do” list?  And a budget is like a to-do list.  If you create a list of monthly expenses before the month begins you will find that your spending habits will change (so long as you look at it).   A budget is telling your money what to do instead of wondering where it went – it’s self control on paper.

No, this isn't our budget. It is just playing one on your TV.

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But may people will tell you that they don’t do a budget.  Some financial experts, like David Bach in his book “The Automatic Millionaire“, say that you don’t need a budget.  Sure, you might get through life without ever using a budget, but you will most likely spend more, pay more, or save less because you didn’t look ahead – you didn’t have a plan for your money.

All throughout the 80’s and early 90’s I bought the things I wanted, did things when I wanted, and felt like I hit the jackpot when my checkbook actually balanced.  At this moment I am surrounded by hundreds of those “great” purchases, two walls full of vinyl records.  Oh what an investment!  And I made an aisle in the next room in order to get to one of three walls full of CD’s.  At least THEY aren’t obsolete (not yet).

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Wasted money is a wasted opportunity.  Greater things are accomplished when you have a plan and write things down, whether it be on the calendar, a to-do list, or a budget.

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If you have never created a budget before then I recommend you visit http://daveramsey.com/tools/budget-forms/ or http://lukascoaching.com/resources.htm for free budgeting tools and blank forms.