3 Steps to Personal Financial Success - Part II: Budgeting

Spending Habits

As consumers, we spend. We spend on things that we need but more so on things that we don't need, but want. Some of that stems from the fact that we refuse to deny ourselves pleasure and we don't want it now...we want it yesterday. Marketers know this and they prey on it. They show you the product in all its glory, all of the benefits you can get from it, and what others say about how quickly they saw results. Like lambs to the slaughter, we fall for it, make the purchase, use it twice, see no results, and then let it sit in the closet for the next five years (oh, never mind that you are still paying for it!).

Now don't get me wrong, I like to spend money myself, when I have it to spend. And of course, live your life to the fullest! That being said, you still have to exercise caution when it comes to money. Living your life to the fullest irresponsibly now may have you tied to the ball and chain of debt in later years when you should be debt free and enjoying your grandkids or shuffleboard in Florida.

Your spending habits can generate an undesireable future for yourself. Would you agree? Spending on impulse, spending when you find "deals" that you haven't budgeted for, or keeping up with Mr. or Ms. Jones are terrible spending habits. A deal is only a deal when you have the money for it.

For example, say there is a suit for $200 that has been marked down to $100. You purchase the suit on your charge card because you didn't have the cash, but you will be getting paid on Friday (that's called pre-spending). Friday comes and you didn't realize the bills that you have to pay or you want to spend your money elsewhere, so you take advantage of the kind credit card people who allow you to pay just the minimum. You get into the habit of paying the minimum, and add some other charges to your card. A few months down the road...you are still paying for the suit plus the other charges on the card and have doubled the $100 price (the deal!) and ended up paying $100 in finance charges to the credit card company. Who came out on top?

It may sound far-fetched, but this happens all too often and is how people get into credit card and other debts. Their spending habits almost become insurmountable, then they reach out for help be it debt consolidation or worse, cash advance companies. Not that there is anything wrong with cash advance companies, but most people don't think wisely about how to pay this loan back or if the benefit is worth the cost. Then they get caught in the revolving door.

Creating the Budget

Go ahead. You can say it. It's the "B" word. The one word people in debt feel as if they can't do because of the debt that they