By: Kevin Drum, Titan Solutions, LLC
Really! Test It!
Are you really living within your means? Are you sure? Following is a simple test for you to try.
Make an accurate comparison of your monthly income versus your monthly expenses. This is a very important number. Of course you already know what this number is, don’t you?
Once you’ve finished, take another look at your expenses. Did you include everything? This is an area where a lot of well intentioned people get tripped up.
I call it “painting the picture” of where you are. It sounds simple. But for many it isn’t.
My observation is that the hard part is to completely list all of your expenses. As the expenses get closer to equaling and even exceeding the income level, there is a tendency to go into denial mode.
In the denial mode, we decide that not every expense really counts. For example, we decide that gifts (regardless of how much we spend on them), subscriptions, trips to the specialty coffee shop, or some other things don’t really count – even though we spend money on them.
Everything counts if you are really spending money on it. If you aren’t sure what your average monthly expenses are, track them for a period of time until you know what they are. Just make sure that you do an accurate job.
Clearly “paint the picture” of your current financial situation – even if it makes your current situation look worse that you thought that it was. Why is this so important? Because if you don’t have a clear picture of where you are (and then combine this with where you want to be) how do you know what steps to take next?
I believe that once you get to this point, you will find hopefulness and encouragement. Because now you have a clear picture and you can generate your alternatives and make your plan.
Question: What is your average monthly income versus your average monthly expenses?
A lot of people don’t know the answer to this. Generally they simply don’t know where their money went. They made money but it is gone now with nothing to show for it.
Solution step: If your monthly expenses exceed your monthly income, ask yourself the following questions. Am I/are we actually borrowing money to pay for this item? Am I/are we going into debt in order to support our lifestyle (even if our lifestyle involves living beyond our means)?
Am I willing to keep borrowing money and going further into debt for this _______? Fill in the blank with whatever it is in your situation. For example, am I borrowing money to eat out tonight?
Finally, think about these questions. If I/we keep going further into debt and living beyond my/our means, what are the consequences of doing this? Is it worth it? If not, what am I willing to do about it starting right now?
Kevin Drum is the founder and principal of Titan Solutions, LLC in the Charleston, SC area. Kevin coaches others to reach their maximum potential. He encourages people to make good choices and succeed by balancing all areas of their life. He is the author of several solution based e-booklets including From Fired To Fired Up and Find Your Niche. If you would like to contact him for additional information please do so through his website below.
Copyright Kevin Drum 2010
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Titan Solutions, LLC