v27.5: Making Ends Meet

Morning folks,

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I'm sure many of us struggle with making ends meet; especially these days.  Now more than ever people need to be mindful of their finances and start living within their means.  Unfortunately most of us have grown accustomed to our lifestyle and immediatly shut off our listening ears when someone tries to talk sense.  I am not exempt from this.

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Think of your finances as a circle.  The beginning of your circle represents your income; this is where it all begins.  What is one thing you remember about a circle?  That's right, they are perfectly symmetrical.  A circle can also be symbolic of continuous or never ending.

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Now for an exercise.  You will need:

• Some paper


• A pen or pencil (crayons will work too and are encouraged if you plan on teaching this to your children; which I highly recommend)


• A crazy imagination

Start off with a sheet of paper and your writing tool of choice; I'm using a mechanical pencil similar to the ones used in Drafting.  The paper represents your financial dreams and goals and the writing tool will represent expenses.  The goal here is to visualize your spending habits.

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Let's get started.  I recommend for beginners to start somewhere near the center of the page and place the writing tip on the paper.  This is the point on your circle that represents your total income.  Now I'm sure all your finances are in order and you know exactly how much you make every month and how much you spend every month.  Hopefully the income is larger than the expense but let us imagine for a moment that your income is lower than your expenses.  To simulate this, begin drawing your circle in a clockwise direction.  Since our income is smaller than our expense, we need to make sure our circle does not line up and beings to form a spiral pattern inward.  Continue on until you've run out of room in the middle.  Feeling anxious as you run out of room?

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See what I've done there?  I've demonstrated what happens to so many of us on a regular basis.  We constantly spend more than we earn and eventually it catches up with us.  We "spiral" out of control until eventually we are trapped and can't go any further.  All our hopes and dreams (represented by the paper remember) are somewhat fulfilled but this wasn't the life you wanted.

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Now take another sheet of paper and do the same thing but this time make your spiral outward.  This represents your income being greater than your expenses.  As the circle spirals outward you see that it begins to quickly cover the entire sheet.  Now the only limitation you have on your financial hopes and dreams is the size of your paper.  If you had picked a much larger sheet you would have eventually covered the entire thing.

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So which circle are you?   Are you the one that is spiraling inward and will eventually run out or are you spiraling outward?  Fortunately, just because you're on an inward spiral does not mean you are destined to stay that route (and vise versa the other way).  There are many ways to pull yourself out of the hole but it needs to start with yourself.  You alone need to stand up and decide you are going to make the change.  There is no magical force out there that is going to make all your financial troubles disappear.  You need to make the conscience choice to change it and then find the help you need to make it happen.  I suggest getting a program to help you with creating a spending analysis.  There are many great applications out there to do this like Microsoft Money or Quicken.  There are also some web-based financial applications out there that can help you do forecasting and financial planning like PocketSmith.

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At the end of the day, you alone are responsible for your financial situation.  Education is key here.  If you don't know the answer to something a quick Google search can yield a mountain of information and resources to help you.  Talk to your bank, tell them your story and where you want to go.  In most cases the bank will be able to assist you.  Take control of your finances and take back your life.

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Cheers,

Al