Know Where Your Money Goes
Posted on April 29, 2006
I conducted an interesting experiment this past week. I visited three very busy convenience stores where I just hung out watching people come and go and observing what they bought. Each time, it was late in the day; around the time people were getting off work. Most of them appeared to be working people on their way home. Many were still in their work clothes. Some wore company uniforms with their names emblazoned above the shirt pockets. There were fast food employees in their colorful work outfits, construction workers in jeans and boots who were driving their company trucks and numerous others who were obviously wage earners. A few had the brisk walk and snappy dress that would lead one to believe they were executives or professionals. But it wasn’t the starched shirts or scuffed work boots that caught my attention. It was their pattern of spending.
For the most part, the ones who were neatly dressed and had an air of professionalism drove the nicer vehicles and purchased little more than gasoline, which they usually paid for at the pump. When they did come into the store, their purchases tended to be milk, bread or other staple items. The contrast between these individuals’ purchases and the others was striking. At lease a third, possible half of those that could readily be identified as wage earners came into the store and paid cash for their fuel. But, regardless of how they paid for their gas, a majority of them came into the store to purchase beer, cigarettes, smokeless tobacco, candy or other snack foods.
The difference between each group’s purchases reminded me of the old adage, “Which came first, the chicken or the egg.” I don’t mean to criticize anyone here, because there was a time when I wore muddy boots and work clothes and stopped off on the way home for beer and cigarettes too, but I was fortunate enough to learn a valuable lesson at a young age. I learned that what you do with money is far more important than how much of it you make and I’d like to share a tip about how I learned that.
Early in my career, I always seemed to come to the end of the money before I came to the end of the month. I wasn’t alone in this predicament; most of my friends were experiencing the same problem. I didn’t view myself as a spendthrift, but for some reason, no matter how much I made, it always seemed to slip away and I just couldn’t seem to get ahead.
Finally, out of sheer frustration, I decided to find out what was really happening. I bought a small spiral bound notebook that would fit in my shirt pocket and started writing down every penny I spent. If I bought a soft drink, I wrote it down. If I bought a candy bar, I wrote it down. Everything! Groceries, gas, cigarettes (yes, unfortunately I smoked at the time), clothes, bowling, even a piece of bubble gum, I wrote it down. At the end of a month, I did a simple analysis; I categorized my expenditures as either necessary or unnecessary.
Loan payments, utilities, food and similar expenditures fell into the necessary category. Unnecessary were the things I wanted enough to purchase, but things I could have done without. Cigarettes, candy, soft drinks, records, a new pocketknife and a new bowling ball were things that showed up on this list. Of course, I had to be honest with myself when doing this categorization.
What shocked me the most was when I totaled the list and discovered that in just one month, my unnecessary expenditures came to more than $600. Wow! No wonder I was always broke. While I learned a number of lessons from this exercise, the most important one was that I could change my life by changing what I did with the money I was spending on unnecessary things.
I stood around watching the steady stream of working people coming and going from the convenience stores. I observed them spending their hard earned money on feel good items that did nothing to improve their lives. As I stood there, I couldn’t help but wonder if their spending habits would change if they really understood how much money they were wasting. If they developed more discipline and better spending habits, wouldn’t it help them drive better cars, wear nicer clothes and possibly get higher paying jobs?
Whether you’re struggling or not, wouldn’t it be worth trying this little exercise for a month? You might be as surprised as I was. I know it caused me to commit to cutting my unnecessary spending in half and start investing the difference. Within a year, my finances were dramatically improved and I was on my way to financial independence. And the most remarkable part was, I never missed a one of the things I gave up in order to do it.
» Filed Under Success Tips Articles
Comments
Leave a Reply