I am writing this series partly to help people win with their own money, but also as a reminder to myself that money pitfalls abound and that we are ALL susceptible to falling into making a poor financial decision.
Part Three Spent Future Earnings
It happened EVERY Christmas. We failed to save money for this Known Upcoming Non-Monthly Expense so we would pull out the plastic and tell ourselves, “We’ll pay this off with our tax refund.” In other words, we spent future money before we ever received it. Some people call this “Dead Presidents” – this is when your money (with pictures of famous people and some dead presidents) show up dead on arrival since they are already pledge toward a debt. Isn’t it a terrible feeling to receive a paycheck, bonus, or tax refund and know that it is just going to immediately go on to someone else? I lived this way for years!
This happened on a much larger scale when I purchased cars with debt. In reality, I spent nearly half of a year’s gross salary just to purchase a vehicle. Not good if you want to win with your money!
I started winning with money when I spent money in a way that generated future earnings (investing!) instead of taking future earnings away (debt!).
PROBLEM: Spent future earnings before even receiving them!
SOLUTIONS: 1) Prepare a budget every month before I’m paid 2) Firing my “wanting” 3) Realized that when I told myself “NO!” I am really telling myself “YES!” to something even more important
Have you ever hurt your finances by spending future earnings poorly?