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Just as there are many things one needs to do
right in becoming financially successful, there
are many mistakes that people should avoid in
order to become a financial success. The first
mistake one needs to avoid is not setting up a
budget.   

In the course of a day or week it’s easy to lose track of
the money one is spending. There becomes a
separation between the normal spending and
shopping habits and a concrete plan of action for what
one should be spending. First, a person should set up
a budget.

To create a budget, a person should start with the
total net income that one has at their disposal. They
should then have a goal of what percent of that
income they would like to save. Let’s say it is 10%.
They should then make a list of all of the things they
truly need to buy in order to survive in a given month.
The usual items are mortgage/rent, food, utilities,
education, transportation, clothing, and entertainment.
Yes, everyone needs entertainment - it’s just that for
those on a tight budget it will be very small amount.
The next step is to plan in detail exactly what can be
purchased in each of these categories. So for
discretionary categories, it may mean no cable TV,
one new pair of pants, and five bottles of soda a
month. Of course the total of all of these purchases
should not be higher than the budget total, including
the savings.      

Here’s the hard part – one needs to actually live within
that budget. One might think that this could be
reduced to a strictly mechanical exercise of spending
do’s and don’ts. But anyone who has ever tried to
stick to a smaller budget than one is accustomed
knows that it is extremely difficult. Even when the
budget means no real physical deprivation*, actually
keeping to a budget is extremely challenging. That’s
because there is a huge emotional and lifestyle
component to most people’s spending.

An example would be the man who visits a sports bar
four times a week. Or the woman who goes shopping
every weekend. This man is not simply spending
money. He is gaining excitement, friendship,
camaraderie, diversion, and escapism. This woman
is   not just spending money. She is expressing
creativity, exploring the world, finding deals, gaining
fulfillment and escapism. So as soon as the budget
interferes with that activity, as soon as the budget
says, “you can not do that today”, there is an internal
emotional and cognitive conflict. Often this conflict is
resolved in favor of continuing the unbudgeted activity,
as long as there are some funds remaining to do so.
But of course this is done to the detriment of their long-
term financial well-being (and maybe not so long-
term).   

If one can fulfill the need that was there while at the
same time spending less money, then there is a
chance for success. One must try for creative
solutions. For the sports bar guy, maybe he can join a
sports league that plays twice a week. There he may
gain the friendship, sense of excitement, and escape
from his daily problems, while at the same time
spending very little money. Similarly, if the shopper
joins a walking club, or gets a part time job as a
shopping consultant, she may satisfy some of the
same need. The alternatives are endless and the
successful substitutes to the spending activity may be
different for everyone. The key is to satisfy the same
need, to fulfill the same purpose, that one did with the
spending activity.    

Once you have learned to create and stay within your
budget you will have developed a habit that will go a
long way towards fostering long-term financial well-
being.  


* Of course, of there truly is physical hardship as a
result of a budget, then question is a different one,
and other alternatives need to be sought.


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_________________________________________
Financial Mistakes People Make -
Number One - Not Creating and Staying
Within Your Budget.
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consultation concerning any financial issue facing you. We
can help. Please contact:
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Have Questions? Our consultants are available to help
in-depth consultation concerning any financial issue
facing you. We can help. Please contact:
Best-Financial-Advice.com
Have Questions? Our consultants are available to help you
with any financial question. We can also provide in-depth
consultation concerning any financial issue facing you. We
can help. Please contact:
Best-Financial-Advice.com
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