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The Total Money Makeover: Why Planning Matters February 20, 2014

We weren’t very far into Dave Ramsey’s book, The Total Money Makeover, before I began to feel just a twinge of conviction. While I was better at handling money than most of my friends, it was becoming quite clear that “better” is not the same as “good”. In fact, my money management skills were, to put it mildly, appalling.

I lived within my means… but not on a budget. To be honest, aside from a few monthly bills for necessities like insurance, I couldn’t tell anyone where the rest of my money was going. I kept a running tally of how much I made vs. how much I’d spent and made purchasing decisions based upon that figure. If there wasn’t enough money, I didn’t spend. If there was, I spent without discretion.

I had a retirement account… but I wasn’t contributing. Instead, I’d left funds contributed by previous employers to build on their own. I had set the investments on autopilot and had never given a moment’s thought to actually calculating the future value of the investment. I would have enough to take a cruise when I retired, but that was as far as my “planning” had gone.

I gave generously… but usually in a panic. Christmas and birthdays were always emergencies. I wanted to give the best to the people I loved, but doing so usually meant foregoing other things that would normally have consumed my funds.

The truth is that I’ve always been more of a visionary than a planner. (Dave refers to people like me as “free spirits”.) While my income was sufficient to meet my needs, I wasn’t handling it efficiently. To do so, I would need to engage in an ancient art with which I claim only marginal familiarity: planning.

This planning began with sitting down and writing out a budget. (Dave offers a great budgeting tool online at: http://www.daveramsey.com/tools/budget-lite/ if you’d like to try this for yourself.) I began with my income (a known quantity) and then carefully subtracted all of my regular bills and contributions. I then began to make my way down a list of things that, according to Dave, ought to be priorities… like saving for medical expenses, automotive repair, and retirement. This was followed by more “discretionary” categories like clothing (I can make due with what’s in my closet and not freeze or go naked) and food (I enjoy gourmet cooking and know full well that portabella mushrooms are not a “need”). It was here that my journey of discovery began.

As I looked over the figures for my previous three months (I had been faithfully tracking my spending in Quicken for over a year), it became evident that my claim not to be an impulse buyer was less than honest. No, I didn’t grab candy bars at check registers or make instantaneous decisions to purchase “discount” goods at the local retailers, but I did have two particularly weak categories: food and books. I admit to having been aware of the latter and even intentionally stayed away from the local book store when money was tight, but the former came as a bit of a surprise. It seemed that health food stores were also a form of kryptonite. Something needed to be done and now. (To be Continued…)

 

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