Have you ever had a friend, in an honest effort to help you, give you some advice that is so obvious that you felt almost insulted? Well you are going to feel that way again now.

One of the most common money mistakes is not knowing exactly how much money is coming in and not keeping track of how much money is going out. This is living paycheque to paycheque.

This typically results in no savings and expensive crippling debt….and a miserable, stressful life.

All of us must spend less than we earn.

There is a well known expression that goes something like:

“The rich are rich because they spend like they are poor. And the poor are poor because they spend like they are rich.”

Over the years I have counselled many people who were “underemployed”. They were smart, serious and capable but staying in jobs with an income below their ability. They were not using their potential. They could make way more money than they were. They needed someone to tell them that and some encouragement. If you feel you can do better, do it. Don’t stay in a low paying job if you can do better.

It is possible but more challenging to increase your income. It is less challenging to spend wisely.

We spend money for a variety of reasons….and many of them are poor reasons.

We spend money out of habit. We spend money because we are bored. We spend money out of peer pressure. Our economy revolves around consumer spending but do you need spend all you earn? Many use credit to spend more than they earn resulting in expensive debt.

We need to review and record and evaluate our spending to make important changes to our relationship with our own money.

A person once told me she spent her money impulsively because she felt somehow it was going to disappear, like ice melting, if she didn’t hurry up and spend it. She never had extra money. Her parents never had any money. She grew up in that spend fast environment.

The first thing I would do with my clients is to set up a spending diary. An honest one.

I have them record every nickel spent every day for a month. Every coffee. Every chocolate bar. Rent. Gasoline. Eating out. LCBO/Beer Store, groceries, cigarettes ……everything.

They carried around a small notepad and every time they spend ANY money they wrote what was purchased and the cost. I didn’t want them to just keep the receipt. I want them to write down the purchase and the cost soon after the purchase was made. EVERY TIME.

I wanted them to stop and notice each time they spend money. I want them to feel “holy sh*t. I just spent money again!”

I know one young woman on a modest income who spent almost $400 a month on fast food. She had no idea. I know many others who spend $150 a month on coffee. A good cup of coffee made at home is about 5 cents. Outside the home it is $2. I know another couple that have a good income but they were always broke. Why? Later I found that he doesn’t know how to cook and his spouse hates to cook so they ate out or got take out several times a week.

Do you know if you squander, on average, $27.40 a day on needless spending the total in one year will be $10,000 !!!

What is the solution to this? That dirty word “budget”.