by Amy Lawson MBA, CDFA®
Hello again, and welcome back!
At this point you know how your cash flows. If your cash flow is negative, your first goal is to make it positive. In other words, what flows in needs to be greater than what flows out.
We establish positive cash flow by budgeting, managing our debt and living within our means. But before we can address the issues of managing debt and living within our means, we must first create a budget.
But, wait, the word “budget” tends to sting, does it not?
The word budget actually does more than sting many of us. It invokes grand visions of lack and we start to catastrophize: “I’ll NEVER get a new pair of shoes.” Or, “I GUESS I’ll have to spend my vacation at my MOTHER’s.” Sigh… Whine (not the good kind).…
Let’s step off the crazy train for a moment and rethink this idea from a platform of sanity, and reality. Let’s throw out the word “budget” and all its negative connotations and use a term that recognizes life for what is: a cash-suck.
The last time I looked, living costs money. Regardless of our zip code, we need money to put roofs over our heads, clothes on our backs, shoes on our feet and food (and wine) in our tummies.
Instead of a budget, let’s create a “Spending Plan.” Let’s PLAN how we are going to spend our money. We’ll set our priorities and direct our money where we want it to go. If we don’t give our money direction, it will direct us down a not-so-pretty path. We may tell ourselves, “I’ll start saving when I earn more money.” It sounds like music to our own ears, after all. It makes us feel so well-intentioned even as we feel the pressure of the due dates of the bills as they stack up around those fabulous boots we put on our credit card, knowing full well we can’t pay them off at the end of the month.
“I WILL save someday, I swear,” we whisper to our fabulous reflection enhanced by those fabulous boots. But the truth is, if we wait until we make more money to actively save, chances are we won’t save. Chances are we will just spend more on boots… or handbags… or dining out… or wine.
If we’re not careful, as our income increases, we will simply spend our money at better establishments. Where we once depended on the dollar menu, we will dine at fine restaurants. Where we once bought our handbags at TJ Maxx, we will head straight to the Michael Kors store at the mall. Where we once searched for designer labels at the bargain box, we will peruse the boutiques or bend toward bespoke. Where we once shopped for wine on the bottom shelf of the adult beverage aisle of Kroger, we will select a label from the posh wine shop down the block.
While we all strive to live more prosperously, it’s important to deliberately create our prosperity. If we don’t deliberately direct our money, as our paycheck grows, we will continue to spend the same percentage, if not more, of our take-home pay on our favorite downfalls. In short, we will keep doing the same ole things while expecting a different result. Didn’t Albert Einstein have a word for this? Yes, ma’am, that word is insanity.
You jumped off the crazy train earlier to reframe budgeting, now stay off the crazy train by rethinking your money. To formally quote Mr. Einstein, “We cannot solve our problems with the same thinking we used when we created them.” Our thinking created our money troubles, different thinking will be necessary to solve them.
Because you now know how you FEEL about money, you can change how you THINK about it. Take some time to think about your money. Decide what is important to you, not only what is important to you today, but what will likely be important to you tomorrow. Think about it, sleep on it, and put it on paper. Create your Spending Plan.
We’ll stop for now. We’ll discuss managing debt and living within our means next time.
Raise your glass. Here’s to you!
Until next time…
This week’s wine recommendations come from Sonoma County, California.
RED LOVERS: Storyteller, Cabernet Sauvignon “Got Away.” “…begins with delicate aromas of earthy cedar, black cherry and vanilla spice, then reveals flavors of juicy plum and smooth dark chocolate and, at long lasts, ends on a supremely satisfying note.”
WHITE LOVERS: Storyteller, Sauvignon Blanc “About Last Night” “…seduces with a crisp acidity and hints of summer grass. Pineapple and tropical fruit flavors fill out the mid-palate and finish fresh.”
Another reason to try Storyteller… We all have a story. The story of our past, the story of our future. While we can’t change the past, we can create our future. Write your own story.