Are Budgets Hazardous to Your Wealth? You May Be Surprised…

A reader asks, “What can I do to get ahead? Should I try budgeting, even though I hate the idea?”

There are many things you can do to get ahead and no, you don’t have to budget! Personally, I hate the idea of being so restricted and only using money set aside in envelopes or on a spreadsheet.

While some people are in drastic situations that may call for drastic measures, I still think you can handle your finances without handcuffs on.

After all, budgets, to me, are like going on a diet, they are restrictive, you want to go off it as soon as you start, and it can give you a bad relationship with money! So yes, budgets may be hazardous to your wealth!™

Here are some easy steps that can make a huge difference and get you going in the right financial direction:

MoneyFlyingOutTheDoorIdentify what your financial “sinkholes” are. Where is your money flying out the door in leaps and bounds? Check your credit card statements if you aren’t sure. It’s usually one of four places that is causing you to be short on cash:

  1. too much money spent eating out in restaurants or buying pre-made deli food (or both);
  2. too many cars (and insurance expenses on each one) or buying new cars too often (buy them less frequently and keep them more miles than usual);
  3. too much shopping for clothes, shoes, and handbags (MORE designer stuff isn’t making you happier, just poorer. Get a hobby instead of shopping so you have something else to do with your time, organize your closet so you can see what you already have and wear it more, and check out if you are addicted to the adrenaline burst you get after making a purchase. If you feel the need to shop every week, you may have an unhealthy addiction).
  4. too much house. Often our housing can be more expensive than we can really afford. It may be a hangover from “buying as much house as you can to take advantage of the real estate bubble.” While real estate is rebounding here, take advantage of this time to sell an expensive property that is making you cash poor and downsize for a longer-term solution.

Realize that the money you “spend” could be money you “invest”. The simplest way to build wealth is to get your money working harder for you. If you are “spending” it, then you are passing up the opportunity to use it for wealth building. Start “saving” money for your wealth building nest egg fund.

If you have debt, don’t feel bad or guilty about it. Debt began as credit and having credit is good. If your credit is maxed out and all you have is debt, it’s just the other side of the same coin. Be grateful you have the credit and start paying your credit cards first before spending more money. Use only your debit card and go on a cash basis. For the next month, don’t spend any discretionary money. In other words, ONLY pay your bills and buy groceries. Try this to get a handle on how much extra money you really have every month. It’s probably more than you think. Use the extra cash to make an extra debt payment.

Only by being aware of what you’re spending money on, can you make changes. It’s different from being on a budget – you are still in control, not the spreadsheet. Get back to basics and realize your money is a tool that you decide how to use.

If you really want to be wealthy, stop wishing to win the lottery and get a hold of where your extraneous dollars are going. YOU are the only person who can change your financial situation. Think “invest” not “spend” and you will have a better handle on starting to build wealth.

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