The benefits of budgeting versus stupidity of spending
FAIRBANKS — To high school and college students, recent graduates, and others seeking employment or already earning incomes, this is the third column in a series to help you enjoy prosperous lives.
With that in mind I have some good news, and I have some bad news.
It is time to get to work and make some money.
The good news is that, with your job, you will get new-found wealth which will open an array of alluring temptations such as vacations, cars, snowmachines, motorcycles and other joyful allures.
The bad news — and trust me and my accountant on this one — is that unless you are carefully budgeting joyful spending now, you will spend a little (or all) of your newfound wealth on a new plasma HDTV today and thereby subsequently hurt your financial security and happiness tomorrow.
At the risk of being a wet blanket (especially to my family) we must postpone the joyful purchases today and budget our spending to enjoy a long term reward.
I learned that unnecessary joy bought today is very often no longer joyful nor affordable tomorrow.
My CPA gave me some great advice that I would like to pass on to you as you prepare to start your independent life: “It does not matter one iota how much income you get, it only matters how you budget, (there is that nasty word again), it only matters how you spend that income.”
The formula
My accountant advises that the most successful budget is to take the first 10 percent off the top and give it to a favorite church or charity, invest the next 10 percent for retirement, (with a trustworthy financial planner), save another 10 percent for emergencies and/or big purchases such as transportation and a first house.
Do not use credit cards and carry a balance on them, hide 10-15 percent to be found April 15 and given to the IRS for taxes, and then set up a budget with the other 55-60 percent and follow that budget as if your life depends upon it — because it does depend upon it.
The benefit
The value of living on a budget with your income is that you can see your financial future and get legitimately excited or make course corrections while there is still time.
While I was tempted to seek a second opinion, my wise accountant says to budget so that we do not have to pay on debt each month using all of the next week’s (dare I say years?) precious income to pay off crippling credit card debt. His reasoning, which really makes sense, is that budgeting builds in us great financial habits, while the patterns developed in charging up the debt hurt us in the long term. Ask anyone of retirement age.
Smart parents will invest their children’s permanent fund dividends in safe investments. Smart children will help their parents by not asking for unearned alluring temptations and by budgeting their allowance.
Regardless of which candidate wins the governor’s race, I doubt he or she will step up and make a contribution to pay our winter energy bills. I also doubt the GVEA, GHU and our fuel distributors will be sympathetic if you and I have unpaid energy bills in January while watching a new plasma HDTV screen.
Jim Rohn once asked, “If you were to show me your current financial plan, would I get so excited by it that I would go across the country and lecture on it? If the answer is no, then here’s my question: “Why not”? Why wouldn’t you have a superior financial plan that is taking you to the places you want to go?” There is great benefit in budgeting frugally.
Sacrifice the lesser to enjoy the greater. Graduates, trust me because I have experienced it, you can have it today, or you can have it tomorrow. You seldom can have it both ways.
It is reported that Noah once said, “Plan ahead: It wasn’t raining when I built the ark.”
Charlie Dexter is a professor of applied business emeritus. He may be reached by email at cndexter@alaska.edu. This column is provided as a public service by the UAF Community and Technical College’s Department of Applied Business and Accounting.
Tidak ada komentar