ICFE eNEWS #17-02 - January 12th 2017
Ask Mr G's "You Are Here"
By Jim Garnett, a/k/a Ask Mr.G, a member of the ICFE's Board of Educational Advisors
their vacation, the Johnsons decided to take a cross-country
trip from Alabama to Wyoming. Everything was going fine until
the afternoon of the second day when they realized they were
absolutely, totally lost. They pulled their old maps out of
their glove compartment and tried to get their bearings, but
soon realized their maps were of little use because they did not
know their present location.
A few minutes later, they
pulled into an Interstate rest area and saw a large map hanging
on the inside display. On that map was a big red arrow reading
"YOU ARE HERE." It pinpointed their present location, and that's
exactly what they needed to know. Now they could chart a course
to their destination.
destination always begins by knowing our present location.
Unless we know where we are, there is no way to know how to get
to where we want to go.
I counseled a family that was in
a similar situation as the Johnson's. This family was
discouraged because they could never make a budget work. They
told me how, in their last attempt, they had designated $100 a
month for savings, $100 a month to pay down debt, and $100 a
month to start a retirement account. All these goals were
honorable goals, but from the very beginning, their plan was
destined to fail.
Why? Because, in similar fashion, they
tried to reach a destination without first knowing their present
financial status. If they would have started by determining
their "cash flow" (the difference between their expenses and
their income), they would have known they were already spending
110% of their monies every month.
As it was, there was no
way that an extra $300 per month was available to fund their
projects. So, after several months of trying to ram a square peg
into a round hole, the family finally gave up in despair,
thinking they were "just not smart enough" to set up a budget.
I told them that their problem was not an intellectual one,
only one of flawed planning. They failed to start their plan
from the proper starting point - that of knowing "where they
were" financially. Trying to reach a destination without first
knowing where we are is impossible. We must know where we are in
order to get where we want to go.
We had them fill out a
simple budget worksheet listing all their monthly expenses, then
we compared that to their monthly income. Now they could see
where their money was going each month, and how they had been
spending more than they were making. They needed this
information to decide where to make spending cuts. Eventually,
they adjusted their spending to the point that the $300 they
needed was available. As long as they stayed within their
spending boundaries, their financial plan would work fine.
This time of year many families implement some plan to
better control their finances. If they do not begin that plan by
knowing how much they spend in relation to how much they make,
their plan will fail before it gets off the ground. They will
soon get discouraged and quit... again. The map to our financial
goals must have a "YOU ARE HERE" arrow to pinpoint our present
financial situation. From that starting point we can decide what
changes we must make in order to accomplish our goals.
you are in the process of setting up a plan to gain more control
over your finances, remember to begin your plan by knowing where
you are before trying to chart a course to where you want to go.
To help you get started, you are welcome, at no charge, to
download the budget sheet I have used for years. Click here, and
on the page entitled "Monthly Budget Sheet," click the download
tab. If that sheet is not to your satisfaction, Google "budget
sheet," and you will be given numerous options.
© Jim Garnett, The Debt Doctor
AskMrG Consulting, LLC
2216 SW 35th Street
Ankeny, IA 50023