You may be surprised by the mistakes people make.

Date: October 5, 2020

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’re 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, and it typically results in no savings and expensive, crippling debt – not to mention a miserable, stressful life.

All of us must spend less than we earn.

There’s a well-known expression that goes something like: “The rich are rich because they spend like they’re poor. And the poor are poor because they spend like they’re rich.”

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

It’s possible but challenging to increase your income. It’s 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’re bored. We spend money out of peer pressure. Our economy revolves around consumer spending, but do you need to spend all you earn? Many use credit to spend more than they earn, resulting in expensive debt.

We need to review, 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 use it. She never had extra money. Her parents never had any money. She grew up in that fast environment.

The first thing I do with my clients is 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 carry around a small notepad and every time they spend ANY money, they write down what they purchased and the cost. I don’t want them to just keep the receipt; I want them to write down the purchase and the cost – and soon after the purchase was made. EVERY TIME.

I want them to stop and take note 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 were always broke. Why? Later, I found that he didn’t know how to cook and his spouse hated to cook so they ate out or got takeout 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.”