Warning! Your money is going everywhere -- gushing out of your wallet, seeping out of your checkbook, oozing from your credit card.
Of course, we don't know exactly what money malady you may suffer from. But if you're like most of us, your dough drips this way and that every day, in tens of different directions -- and much more than it should.
There's so much to managing one's finances: spending habits, debt, insurance, short- and long-term investments, retirement, taxes, big-ticket expenses, hiring professional help, and so on. So much to know, so much to keep track of.
Let's look at a hypothetical example of someone with a small leak in her cash flow:
| Money Seepage | Annual Cost |
|---|---|
| $7 a day at work on lunch/snacks |
$1,800 |
| Not shopping around for best car insurance | $200 |
| Missed tax deductions and credits | $600 |
| Useless tools, clothes, or trinkets | $400 |
| Rarely watched premium cable stations | $120 |
| Ignoring employer 401(k) match | $1,000 |
| Neglecting to refinance the mortgage | $2,400 |
| Accepting credit card's interest rate | $400 |
| College savings in tax-unfriendly account | $200 |
| Ignoring medical flexible spending account | $150 |
| TOTAL | $6,750 |
See how easy it is to walk through life, trailing frivolous expenditures and missed opportunities? Sure, this is just an example, but contained therein is a lesson for all of us: There are many ways to spew cash.
It's a question of priorities, really, and of control. So try this little exercise to see if you're really getting the most bang for your bucks: On a piece of paper, list five uses of your money that made a significant positive difference in your life (perhaps your education or a worthy stock). Then, list five uses of your money that added little to your quality of life (your daily half-dozen of donuts).
Now, let's contrast the past with the future. List five uses of your money that will positively affect your life in a decade or more (e.g., contributions to your retirement accounts). Then, list five uses of your money that will negatively affect your life in a decade or more (e.g., contributions to your credit card accounts).
It's a simple exercise, but it's a great way to start thinking about how money management will affect your day-to-day living now and several years hence. Your ultimate goal is to funnel most of your money into the things that will make your life better in lasting and meaningful ways.
Take just a moment to consider how great it would be to know that each dollar you spend is going toward something important, and not something that's gone in 20 minutes, with nothing to show for itself other than an extra jiggle in your thigh.
If you're looking for help with gaining control of the flow of your dough, check out The Motley Fool Personal Finance Workbook .
