financial situation

What Type of Money Situation Are You In?

by mike on April 17, 2010

Most people will find themselves in one of three situations in regards to money.  Although it is a very basic way of looking at it, it is amazing how you will be able to see yourself in one of these situations.  It is important for you to acknowledge which area you fall in so that you can then determine which area you want to be in and make a plan to get there.  Let’s take a look at the three types of money situations.

1.     There is about ten percent of people who are extremely careful with their money.

At ten percent, they are obviously the rare exception.  These people have very little, if any, debt.  They live on a monthly budget and are very conservative with their money.  They certainly do not do car leases, revolving credit card debt, or spend money they do not have.  Flashy homes and flashy cars are not a part of their lives.  Chances are, they live on your street and you don’t even realize how large their net worth is.  They slowly and methodically save money and are building a very nice nest egg.  If this is you, congratulations!

2.     Another ten percent or so make so much money that they get sloppy and can really get themselves into a financial mess.

These are the doctors, lawyers, etc. that make a very high income.  Unfortunately, it is easy to not pay attention to what you are doing when you make a high income.  You can fall into the thought process that “I make good money, why do I need to budget?”  Anyone can spend more than they make.  Ask the movie stars, music stars, or professional athletes that go bankrupt, they know about spending more than the millions they made.

Many people in this category go for the bigger, better, deal.  They buy stock in the upstart company their golfing buddy told them about.  They sink thousands of dollars into the futures market.  They have the luxury of having lots of money to “gamble” with in order to get the “big payoff”.  It can become a major ego thing.  Unfortunately, people who fall into this situation usually need to be humbled to change their habits.  They have to come to the realization that money is not their problem, they are their problem.  This doesn’t mean they are bad people, they just need to pay attention more, get on a plan, and think about what the purpose of their money is.

3.     The rest make good money, but not enough to keep out of trouble.

This is where the majority of people fall.  This is the group that allows debt to creep into their lives.  They never start with a goal of going into debt, but all of a sudden, they look up and are $30,000 in debt.  This is the group that believes all of the myths about money.  The myth that you always have to have a car loan.  The myth that it is impossible to go to college without student loans.  The myth that in order to get ahead, you have to use “OPM”: other people’s money.   The myth that paying off your house early is a bad idea because you get a tax write-off.  If you believe or have always heard these myths (there is plenty of others by the way), e-mail me and I can walk through with you why they are myths.

My challenge to you is to really think about which of the above situations you find yourself in.  Then think and pray about which situation you want to be in.  Shoot for the goal of being in the top percent of people who are winning with money.   The old saying goes that you miss 100% of the shots you don’t take (I believe hockey great Wayne Gretzky said that).  If you do not intentionally change your habits and take the “risk” of sacrificing now in order to win, the chances are great that you will miss the goal of financial success.