debt management-The "B" Word

Lesson 3: The "B" Word

Key points Discipline is great, but you'll also need information if you plan to cut down on spending. This information comes from a budget. Even a simple, top-level budget can be surprisingly valuable. Short-term savings goals are a great way to enforce spending discipline. Keep giving yourself the occasional treat, but get in the habit of planning for them. As we said at the outset of the seminar, beating debt is simple, but not easy. For one thing, we are relentlessly driven by advertisers to "keep up" with our friends and neighbors. Moreover, every time we turn around we are confronted by the opportunity to get it now and worry about paying for it later. Some credit card companies go so far as to tell us that we "deserve" more stuff (sweet, aren't they?). If you want to rise above all of this and take control of your finances, you'll need a different perspective and the motivation to act accordingly. So, the next time you're about to spend money that you don't have on something that you don't really need, don't waste your time feeling guilty (when has this ever worked anyway?). Instead, ask yourself two basic questions: If I can't pay for it in full this month, what is going to change next month? Where will the extra income or reduced spending come from? Be specific. What fun, motivational one-year savings goal am I working towards? Question One: B is for Budget If you read question number one carefully, it's obvious that it can't be answered effectively without a good understanding of how much money is coming in every month and exactly where it's being spent. Creating a detailed budget is obviously the best way to develop this kind of insight but, for some reason, it's also among the toughest of personal finance tasks to pull off. On the surface, it doesn't seem so difficult, but it's amazing how few people actually complete the task. If you're among those who have succeeded in setting up a budget, please accept our heartiest congratulations. You'll skate through the workbook exercises. If you're in the much bigger group, however -- those of us who don't budget, or haven't gotten to it yet -- don't give up yet. In the workbook exercise, we'll get you started with a shortcut budget with just enough work to make your question one answers pack a good punch. Question Two: Motivation Developing a budget, saving money, and sending out debt payments make for a pretty dull life. You have to let a little sun shine in, or you're bound to collapse under the strain and give up. One good way to add some zest to the game -- while providing a motivational edge at the same time -- is to come up with a fun one-year savings goal. So, sit down and think about it. If there is a spouse and children involved -- who will surely be wondering why money is suddenly so tight -- get them in on the reward planning too. Together, come up with something fun that will keep you all focused.

Shyiraho Igitekerezo!

[Ibitekerezo]

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