Excerpt: 'Enough Already'

Today's needs

How much of your income do you need to survive? Are you able to take care of those needs? Remember, you're just talking daily sustenance here. How much do you currently spend on food, clothing, and shelter? How much debt do you have? Is it "good" debt or "bad" debt? Good debt is money that you borrow toward something that will produce cash flow, like taking out a mortgage to purchase a home, which gives you a place to live, a tax advantage, and an asset that grows in value over time. Student loans also fall under this category—school increases your earning power. Bad debt is money that you borrow to purchase disposable items, often with a credit card. If you don't make monthly payments in full, you're effectively paying more for the items you purchased. What seemed a bargain the day you purchased it isn't such a deal when you're barely touching the principle and paying 25 percent interest on your credit card balance three months later.

Today's wants

Often when I am looking at the clutter in someone's home, the homeowner will exclaim with a lot of pride: "I'm a great shopper! I can find a bargain better than anyone else!" If you ever go shopping "just for fun," then every single thing you buy on one of those expeditions falls into this category—the stuff you want but don't need. You usually know when you're splurging. But in today's world, some of your luxuries have started to feel like necessities. If you're not successfully managing your money, spending responsibly, and saving for a rainy day or your retirement, then you're not entitled to a high-tech TV with cable service. That is a luxury. If you're not managing your money, then you're not entitled to expensive restaurants and prepared foods. Those are luxuries. If you're not managing your money, designer clothes, fancy cars, jewelry, and vacations are luxuries. If you have credit card debt and/or you're not managing your money, these are the areas you're going to have to examine for costs to cut. Notice some repetition here? If you're in a financial hole or struggling with your money and are serious about turning things around, these luxuries are the first things that have to go—no discussion!

Tomorrow's needs

Think about the major expenses that you know -you'll have in the future, and imagine those that might take you by surprise. Will you need money to pay for a wedding—yours or your -child's? Is there a chance you'll want to go back to school? Do you have children you hope will go to a private college? Do you own a home? How long will you be making payments on it? What maintenance is due? Will you need or want to move to a more expensive place?

As you think about your needs in the future, you must anticipate unpredictable circumstances. What if you have a serious car accident? You'll need insurance and money set aside to deal with medical expenses and lost income. What if something happens to your spouse? A parent? What responsibilities might you have and will you be able to afford them?

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