If you think about it, there are only a few things you can do with money. You can spend it, make debt payments with it, save it, invest it, and give it away.
In countless ways, that’s the order our culture conditions us to choose.
So, we start earning our first salary and our first thoughts turn to what we can spend the money on – where we can live, what type of car we can drive, where we can shop for clothing.
When spending comes first, debt always seems to come second. There’s just something about a spend-first life that leads to spending more than we make.
If any money is left over after all that spending and all those debt payments, maybe a little will be saved, invested, and even given away. But there usually isn’t much money left over.
Pulling a Financial 180
What if we set our priorities differently? What if we turned that cultural order completely around?
With every dollar that came into our household, what if we first gave away a portion, then saved a portion, and/or then invested a portion? What if we avoided all debt except a reasonable mortgage? And what if then and only then – after we’ve given away a portion, saved a portion, and/or invested a portion – we looked closely at how much was left and then decided where we could live, what type of car we could drive, and where we could shop for clothing?
Do you know what then? Then we’d have a remarkably good financial life.
Getting to a Better Financial Place
Is there something about your financial life that isn’t working very well right now? Does it seem impossible to find the money to save or invest? Does the whole money thing leave you feeling worn out, stressed out, or unhappy?
Try this. Take a look at my Recommended Spending Guidelines. You’ll see that there are different guidelines for nine different household incomes and four different family sizes. Find the income and household size closest to yours and see what it would look like if you followed those guidelines.
You’ll notice that the guidelines call for no debt other than a mortgage that requires no more than 25 percent of your monthly gross income, including your property taxes and insurance. If you have a credit card balance, a vehicle loan, or a student loan, you’ll have to take money from other spending categories in order to cover those payments.
But stay with me. I’m going to be talking a lot more this year about how to get out of debt and stay out of debt forever.
For now, just set up an ideal spending plan based on my recommended guidelines.
What are the biggest barriers to bringing your real financial life in line with this ideal financial life? Let me know in the comments below.
I firmly believe that anyone with even an ordinary income can create an extraordinary financial life. I’d love to help you get there.
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