There is something that gets left out a lot when the topic of personal finance comes up. It is one of the most simple things to grasp, yet also one of the hardest to do. It is something that I personally am terrible about if I don’t watch myself. Ok enough suspense already, wheres the beef?

The secret is simple:

Do not buy things you do not currently have enough money to buy.

Ok, you’re thinking, thats pretty obvious. But is it really? Lets dig a little deeper here. If you are like me (note: not referring to good looking and intelligent) then how many times have you said to yourself “well, I have extra on my next paycheck so I will just fit it in there.” Well, there is a good chance that something else will come up next pay period, so then both the original charge AND the new charge get put off. This is what I like to call the reverse snowball. Snowballing is a common metaphor for how to get rid of debt….well this is the best way to build debt.

Here is a a good example. In the consulting environment I get paid a bonus based on how many billable hours I worked for a customer in a given month. I do not figure this into my budget and it varies wildly based on what customer, what Im doing etc etc and its always paid on the second paycheck of the month. For the first part of the month, if I know Im getting a good sized bonus for the month I will overspend outside my budget because, hey, extra money is coming. The problem is that I never know exactly how much it will be and it makes it very easy to get carried away and go wild with the spending. Yes, even a financial titan such as myself will be defeated occasionally by spending temptation. Its my Achilles heal if you will. Ok enough with the greek mythology. Lets strategize:

1) Stick to the budget except in case of absolute complete and total necessities. Medical expenses, car breaks down, furnace goes out and it’s so cold your beta fish is swimming under a layer of ice (true story)….these things are ok. NFL Sunday ticket is calling your name, not ok (also true story).

2) Budget according to only what you KNOW you will make.

3) Make an emergency fund. Yes I know its easy to use credit as an emergency fund, but you should be putting money aside anyway.

4) Be honest with yourself. Most people I know are masters at telling themselves they can easily pay something off later. Don’t do it.

5) Take care of yourself and your things so that you stay healthy, and they stay working. The best way to cut out medical and other expenses is preventative action.

Bonus: Pay yourself first, this will work wonders in keeping you to #1.

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