Want to drop a bad habit or develop a good one? You need a plan. Or, rather, you need a list.
We Americans love our lists. We especially love short lists. Just check the headlines on magazines, features sites or blogs. You’ll almost certainly see ones like “Three easy steps to lose weight/stop smoking/become a millionaire.”
Having a list makes us feel we’re already halfway to achieving our goals. Lists make us feel confident and in charge: I’ve got it all figured out! Now I just have to implement it!
It’s never really that simple, of course. If three steps were all it took, we’d be surrounded by thin, rich people whose fingers were unstained.
However, making a list does serve a purpose: It reminds us that we can make changes in our lives.
Shorter is better
They don’t even have to be big changes. I challenged readers of the (now-defunct) Smart Spending message board to carry their lunches to work at least twice a week for a month. Some of these “Brown Bag Challenge” participants found themselves with an extra $100 or more per month to throw at consumer debt or mortgages.
What could you do with an extra $100 a month?
Here is my list of rules for money management. Shorter is better – except when it comes to things like massages and vacations – so I kept it to four.
Rule No. 1: Spend as though every dollar matters. That’s because every dollar does matter. A few bucks for coffee, a dollar in the pop machine, a magazine and a corn dog when you go in to pay for your gas – it adds up surprisingly fast.
Please note: This does not mean that you should never spend money. It means that you should be mindful of how you spend it. An easy way to do this is to compare spending impulses with your long-term goals.
That $100 or more a month you save by brown-bagging twice a week could be used to help pay down student loans or consumer debt. It becomes $1,200 a year plus interest (such as it is) added to investments, or to an eventual down payment on a home of your own. How many corn dogs do you really need?
Just a little bit of planning
Rule No. 2: Live like there is a tomorrow. A surprisingly common reader refrain in the PF blogosphere goes something like this: “Spend your money now! Who knows what tomorrow will bring?”
Well, what tomorrow usually brings is … another tomorrow, with the usual obligations and opportunities. You need to be ready.
Again, this does not mean you can never have any fun. It simply means a bit of basic planning, such as:
- Setting up a budget (consider an online budget planner)
- Contributing to a 401(k) at work (especially if management chips in)
- Creating an emergency fund, even if you don’t earn much money
Such things will come in mighty handy if you do survive past age 30. (It happens.)
Try a little tenderness
Rule No. 3: Don’t forget to give. Tied up in knots over all the things you want but can’t afford right now? Give away some of your money.
Seriously. It will get you out of your own head and provide some much-needed perspective about what’s going right for you. Grumbling because you can’t afford technology upgrades? Drop off a $20 bill at the food bank and ask employees about the clientele. Listen to their stories.
When you realize that earlier in the day you were whining about having to save up for an iPad, the embarrassment will make you want to fling yourself off a bridge. (Don’t do that, by the way.)
What if you truly can’t afford to part with even a dollar? Offer a couple of hours a month to a cause. Get some free-after-rebate toiletries and drop them off at a shelter. Donate a few rarely used possessions to an agency like Goodwill or the Salvation Army, or Freecycle them.
One study indicated that lower-income people give away more relative to their income than wealthy people do. Try it. Compassion will enrich your life.
Making things happen
Rule No. 4: Dream as though there were no limits — but plan as though there are. You want to get married. You want to start your own business. You want to travel the world.
Congratulations! Now: How are you going to pay for it?
Dreams are terrific, but they exist only while we’re sleeping or woolgathering. In real life, the things we want don’t simply happen to us. We make them happen. That means planning, creativity and, yes, work.
Don’t dismiss your dreams out of hand. There really could be a way for you to become a baron of industry, or to backpack around the world. But just leaping in and hoping for the best isn’t the right way.
The late Col. Norman Vaughn famously said, “Dream big and dare to fail.” Here’s what I say: “Dream big and plan to succeed.”
That goes for a lot more than money management. It could also help you lose weight and quit smoking.