Are You Wasting Money?

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By Dayana Yochim (TMF School)
August 8, 2002

It's day three of our internal audit campaign inspired by the SEC's mandate to CEOs: Know your numbers. In the week before the SEC's Aug. 14 deadline, we're taking 15 minutes a day to see if our own finances pass muster.

If you've been playing along at home, you've already got a snapshot of your current balance sheet. And yesterday you tracked every dollar that left your hands (right?), to get an inkling of your annualized spending.

Today, take 15 minutes to hold a strategic planning session with your board of directors (or sole dictator, if you're single). Write down your short-, mid-, and long-term company goals. If you don't already have a cash cushion for emergencies, that's a good short-term place to start. What big expenditures do you plan to make in the next 5 to 10 years? (A new roof? College for the kids? New Humvee?) Now think even farther out. Retirement sounds like an OK long-term goal, right? What else gets you excited about saving and investing?

Next, take a moment to think about how closely your everyday spending reflects the goals you set for You, Inc. The best CEOs run their companies with laser-sharp focus, making sure every dollar they spend and save is aligned with their company mission. They aren't easily distracted and don't fritter millions away on ventures that don't add to their ultimate vision. So ask yourself: Are you funding the things that are most important to you?

Remember that $7 lunch you bought yesterday? When you annualize that expenditure, it comes out to around $2,500. What percentage of your annual income is that? Was the hour of satisfaction (and extra jiggle in your thigh) worth it?

No expenditure is too trivial to throw off your plan; every dollar counts. Can you afford to set aside just 10 bucks a week? Over the course of 15 years, you could pile up more than $11,600 in savings (assuming a 6% annual rate of return). By contrast, spending $10 a week on a credit card charging 18% interest will leave you owing $40,000.

Your assignment today: Take 10 minutes today to make a list of short-, medium- and long-term goals, and see how yesterday's spending stacked up against it.

We'll continue our series on self-auditing on Monday, with a discussion on how to put your savings plan in motion -- and on autopilot.

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