financialcounselor

Know where the Money Goes

In Uncategorized on May 15, 2012 at 10:11 pm

I’d say the most common question I get asked by my clients is this: “Do I really spend that much money?”
The answer is always yes, and it’s always a problem. The first thing I do when I sit down with a client is put together a list of their monthly spending. And when we add up the numbers, the total alot of times hits home like a ton of bricks.
This is when I hear the second most common question: “Are you sure you added that up right?” I haven’t caught my calculator taking a day off yet.
It’s so important to know how much money you spend and what it costs you to live. I don’t mean right down to the penny, but you have to know where the bulk of your money goes–how are you going to be in control of a situation if you don’t know what’s going on?
For example, one client named Sara was so disbelieving, she had to get a pen and add up the numbers herself. She was shocked to find that her monthly spending totaled more than her income.
“Sara, your debt payments alone are a thousand bucks,” I said. “And from what you told me about your Starbuck’s habit, that’s another hundred dollars a month just for coffee. And you said you spend seven or eight dollars a day eating lunch out. There’s another hundred and fifty.”
When we factored in the necessities–food, utility bills, transportation, and such–Sara’s entire income was spent easily. And that’s why her credit card balances had gotten so high.
So if you’re having money problems and you don’t know why, the first thing to do is add up all your spending. And make sure you’re sitting down when you hit ‘enter’ on the calculator.

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