Your Money or Your Life: A Practical Guide to Managing and Improving Your Financial Life - Softcover

Über die Autorin bzw. den Autor

Alvin Hall has been training and counseling a wide range of financial service companies and institutions in the United States and around the world for the last twenty years. He lives in New York City.

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

YOUR MONEY OR YOUR LIFE

CHAPTER 1
Money and Your Mind

Understanding and Taking Charge of the Ways You Spend

The Secret Meanings of Money

The key to making better short-term and long-term choices about your money begins with understanding your own approach to earning, spending, saving, and investing. To do this, you need to uncover the secret meanings that money, risk, and reward have for you. Once you’ve done this, you can begin developing a more positive and enriching style of financial management that you can really live with through easy and difficult financial periods.

A crucial step to understanding your own attitudes toward money is to recognize how you really handle money. The bad news is that many people are subject to self-delusions about their spending habits. The good news is that there’s a simple process you can use to do away with your distorted views no matter what they are. All that’s required is effort—and the will to humble yourself and face reality.

Your Daily Spending Diary

Begin by keeping a daily diary of your income and expenses for one month. No one—and I mean no one—is really capable of accurately remembering everything he or she spends money on from one day to the next, let alone from one week to the next. So keeping the daily diary or journal of your spending is important. As the poet Robert Frost, who had serious money quarrels with his in-laws, once put it:

   Nobody was ever meant
To remember or invent
         What he did with every cent.

So if you try to write down your money habits long after the fact from memory, I promise you that the picture you paint will be inaccurate. And it will probably be flattering— deceptively so.

And why an entire month? Because anything shorter doesn’t represent a serious commitment to change and is unlikely to capture a typical cycle of a person’s earning and spending. A spending diary for a week or two isn’t long enough to provide a real picture of how you spend.

Use a page for each day and keep them in a notebook. As you list everything you spend money on, record as well how each transaction made you feel and also a brief summary of what you did that day. You will find a sample form on page 12 for such entries. Feel free to make thirty photocopies to use for an entire month. And see the sample on page 13 of what a filled-in diary page might look like.

Record credit card spending at the time you make the purchase, not the day you pay the bill. Create a checklist so you don’t overlook online, telephone, or catalog purchases. Make a note of the day you pay mortgage, utilities, insurance premiums, and other bills.

If you’re married or have commingled finances with a partner, housemate, or family member (in this book, I’ll refer to all these situations as “partnerships”), you and your partner should each keep a separate diary. Then combine the information from each diary to form a single document.

If your partner refuses to take part in the process, then so be it. Don’t let that stop you. Go ahead and create your own diary. You’ll benefit anyway, and so will your partner. When your partner sees how much more organized and improved your finances have become, he or she may be inspired to join you the next time.

Use a notebook or a journal that is easy to carry. You’ll need to bring it with you wherever you go and record the expense immediately—otherwise you’re apt to forget. If toting the diary around feels awkward, try using 3 × 5 index cards, Then, at the end of the day, fill out your diary from the note card entries.

Does this sound like “too much trouble”? Well, that feeling is your first psychological checkpoint. If you believe you don’t have fifteen to thirty minutes available to write down your daily expenses, you’re building up excuses for remaining financially disorganized and out of control.

YOUR DAILY SPENDING DIARY



YOUR DAILY SPENDING DIARY
Date: June 15, 2009Sample
What You Did: Bus to work. Lunch with Susan. After work had a quick bite at a restaurant with Geoff. Home at 8. Watched television and went to bed.

How You Felt: Had a little spat with boss at work—what a pain! But felt better after talking with Susan at lunch. Great movie on TV. Looking forward to date with Trevor tomorrow. Life’s not so bad after all!
What You Spent: What It Cost: bus fare to work $ 2.00 coffee and roll   4.00 gasoline fill-up 30.00 lunch—sandwich, salad   8.95 dinner with friends (wine) 21.35 magazine   2.95 bus fare home   2.00 jacket from dry cleaners   4.00 TOTAL SPENDING FOR THE DAY:     $ 75.25

What Your Daily Spending Diary Will Teach You

The diary exercise will make you keenly aware of the money that seems to “disappear” because we mindlessly spend it and have nothing to show for it. When I went through the exercise, I was stunned to realize how much I spent on magazines and newspapers. Whenever I had time to kill waiting for a train or on my way to an appointment, it was so easy to buy a glossy or two to pass the time. Do that three or four times a week, and twenty or thirty dollars can vanish with little trace.

Eating out is another costly habit that easily gets out of control. The once-a-week dinner out easily escalates in price. One glass of wine becomes two glasses, then half a bottle; the occasional dessert becomes routine. Soon the fifteen-dollar meal costs twenty-five dollars, then thirty. And it doesn’t stop with a weekly dinner. You’re so busy that you find yourself ordering in once you get home or grabbing a take-out meal from the nearest shop rather than cooking at home—first one day a week, then two, then three. The same happens with lunch. And then there are the quick snacks, the coffee breaks with pastry, the weekend brunch. The damage to your bank account can be enormous. (And it doesn’t help your waistline, either.)

Three responses. I’ve found that most people who really pursue the diary exercise react in one of three ways.

1. Sudden surrender. Some are so shocked or disturbed about what they learn that they throw up their hands. Often they abandon the diary after just a few days. They quickly rationalize their failure to keep the diary by saying with a dismissive gesture, “Oh, it really doesn’t matter.” This reaction amounts to a refusal to take control and responsibility over your own financial life. In fact, it sometimes goes along with an attempt to blame others for your money woes: “Oh, I’d do better if it weren’t for my wife—she’s the one who really goes wild with the credit cards.” “It wouldn’t matter how much I spend at the hairdresser if only my husband made a decent salary—he’s the real problem.” “The trouble starts with the kids—they never stop begging for the latest toys they see at the mall or on television. How am I supposed to say no?” If you fall into this category, don’t expect sympathy from anyone. Whatever the causes of your money woes, they are...