Is Money Management Your Problem?

Do you believe that if you could just increase your income a bit, it would solve all of your money problems? What would you say if I told you that it was untrue? Many families that earn an excellent income still find themselves short of funds on a regular basis. More money would not solve the problems for most people. Money management may be your answer.

For most people who find themselves a little short of cash just before payday, the truth is that they have a money management problem. People tend to set spending priorities with little or no consideration for their income. Remember the old saw, “He has Champagne tastes on a beer income?” Does that apply to you?

Can You Afford Your Current Lifestlyle?

What you want, and what you can afford, may not be the same. Almost everyone knows that a multi-million dollar home or that $250,000 Lamborghini is beyond their income, or at least they should know this. However, very few people realize that a modest home or a new Ford may also be beyond their means. Unless of course they learn to manage their money.

Debtors’ Prison

The popular practice currently is to borrow the money to pay for our purchases. We heap ever increasing amounts on our credit cards. All with the hope that our next raise will come through; that we are not going to be unemployed for some reason; and we will be magically able to pay off our debts. Life doesn’t always work that way as most of us eventually discover. Covid-19 has been a big wake-up call for many who are now so deep in debt that they may never get out. Are you one of them? Then a money management plan can certainly be of help.

“Unless you control your spending, making more money won’t help.
You’ll just end up with bigger payments.”
Dave Ramsey

Our Story

When my wife and I were first married, we decided that we wanted to raise our children in our own home in a decent neighbourhood. Although were were both working at the time, we calculated our budget based on only one of us working. It was obvious that we would never be able to purchase a house with only one income. We decided to manage our money to allow us to save as much money as possible each month. These savings were to help defray the cost of purchasing a home in the future.

The price of houses was increasing dramatically at the time. And we concluded quickly that we could eventually have a small down payment for a home. We would never, however, be able to afford the mortgage, taxes, utilities, etc. that come with a home. To say the least, we were quite depressed about the situation.

Eureka Moment

One day while visiting family and lamenting our inability to afford a home, my grandmother spoke up. She told us that we needed to manage our money and our expectations to reach our goals. “Do what your grandfather and I did,” she said. Only then did I remember that my grandparents had for years rented out a suite in the basement of their home.

We immediately started searching for a home in a decent neighbourhood, but added in the requirement for an income generating suite. Eventually, we found one in our price bracket, made an offer and soon purchased the home. Realizing that the main floor suite would earn a lot more income than the basement suite, we decided to live in the basement of our own home for several years.

All of this planning paid off because shortly thereafter, my wife became pregnant. She was soon required to quit her job, yep, that was the rule in those days. We were reduced to one income, but because we had managed our money for this eventuality, we were fine financially. With only one salary, we were able to pay all of bills and when my salary had risen a bit, we were able to move upstairs in our home.

Money Management

All of this time, we drove my old car. It was ten years old when I bought it several years before we got married. We babied it until it finally died. A new car was out of the question. As a matter of fact, we couldn’t even afford a safe used one. We went without a car for a couple of years until we could afford to pay cash for a used one in good shape. It was a nuisance to be without a car, but we survived.

During this time, we had managed our money carefully, but still had no money for frills. We couldn’t afford a baby-sitter, a few beer for the weekend, new clothes, a vacation, restaurant meals, etc. But we were determined, and after a few years, we were able to sell our house for a nice profit, and buy a home without an income suite. Later, after much saving, we were able to buy a new car for cash (a mistake, but more in another article).

Lest you think otherwise, we were very happy during those frugal years. We had goals, and we worked as a team towards them. Over time, our finances improved greatly and we were able to afford nice family vacations – Disney World and Disneyland for the kids, museums and historical sites for the adults.

Frugal Mindset

We have maintained our frugal mindset and money management practices to this day. Now, in retirement, we can afford to travel, well mostly cruise, and see the world. We had scheduled trips to China and the British Isles for 2020, but Covid-19 obviously cancelled those plans. When things clear up, we are ready to go.

If you think that you are perpetually short of money, examine where your money goes. Is it helping you to get where you want to go? Is your problem an income or outgo one? You can find out by employing the free Budget Tracker at the end of this post.

Read my article Four Reasons Why Budget Isn’t a Bad Word for more on this subject. ‎

Please comment below and let me know what you think about this topic.

As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.