So many of us tend to spend the money we don’t have.
Two ways of spending money you don’t have.
- We spend money either one, before it has been received. We are spending money the we plan to get, like a paycheck.
- The other way is that we are spending money that we don’t have and or won’t even be getting.
Friends and Money Conversation
I was spending time with two friends a few weeks ago and we had a pretty big money conversation. I loved it. The one friend is a bit younger than me and she is just really starting out on her own financial journey. She lives at home, but has been working and does have some bills and things she is responsible for, as well as paying for things she wants such as outings, shopping, and trips.
We were discussing the importance of managing our money in a way that we have the money to pay our bills, but also to do things we want to do with friends or having the money to purchase the things we want.
I shared the importance of telling your money where to go. Looking at what is coming in, but also what is going out when it comes to bills, and necessities, including building up an Emergency Fund, savings or Sinking Fund for trips and or other bigger purchases. Then to evaluate and decide what money is left for spending.
Another point that was mentioned by my friend is that she is realizing she needs to plan for when work get slow. In the line of work that she is in they have busier season and slower seasons. In the spring the work will pick up and they will be busy through the summer and into the fall. As fall winds down work slows down and, in the winter, there may be a few months that she wont work at all, or maybe a little here and there, but not the steady income like in the summer.
This is a huge one, especially if your income fluctuates due to seasons, but this also can be applied even when your work and paycheck stay consistent.
Why it is important to manage your money?
Regardless if you have a steady income or a fluctuating one, it is important to manage your money in a way that you can handle a slower period of pay. As the saying goes “death and taxes.” Benjamin Franklin said: “but in this world nothing can be said to be certain, except death and taxes.”
Point being, that our paycheck isn’t a guarantee from one check to the next. So regardless if your income is steady or not, you want to be saving and planning for those slower times. Just as my friend was realizing that she needed to put money aside during the busy times to have money to pay for the bills and necessities during the slower times, the same is a useful tool for when we have a continuous stead income, because that again isn’t certain.
Putting money aside in either case in beneficial, here are a few reasons why this matters:
- Having money for slower times of work and income.
- Taking unpaid time off work due to illness or family emergency.
- Loss of job and or being laid off and having to get by with reduced amount or no income.
- Change in employment and having a gap between paychecks.
What about money you haven’t received or won’t even get?
I will admit I have been guilty of this one myself, spending money that I am anticipating. Sound familiar?
For example: you typically get a big tax refund each year, so knowing what you usually get and or once you know what you will be getting back from filing your current taxes. Maybe it is typical for you to get bonuses through work, like quarterly or yearly bonus. You are expecting it, so you start spending it. The deposit or check hasn’t even hit the account yet, but you are spending it.
You ae going to buy new home décor, put a down payment on a vehicle, home improvement project, take a vacation, whatever it may be, you are in expectation of the money, so you spend it ahead of time.
What happens if the money never arrives? What if your job changes its bonus structure and you get less than you anticipated or your you don’t get anything at all? What if that tax refund you expected to get now suddenly must be used on an emergency?
You have already spent the money you haven’t even received. Maybe you spent the money on a credit card thinking, “I will just pay this credit card balance once my “tax refund” or my “bonus” comes in.” Then the money doesn’t arrive or you have to use it for something unexpected. What about that credit card bill? You can’t pay that like you anticipated, so now you are paying a minimum balance and incur more debt due to a high interest rate.
Can you relate to either of these scenarios?
I’ve got you. Maybe this is how you have always done things and managed your money, but it doesn’t have to stay that way. Change is possible, even when it is scary or uncomfortable. Talking about money and looking at our finances can be very emotional. When we work together, we do so without judgement, shame, or guilt. We focus on grace, understanding and learning.
Are you ready to tell your money where to go and to live with financial freedom? If you want a fresh perspective on your finances simply schedule a Free Consultation HERE.