Whenever I meet people, and they find out what I do, I tell them, “You need a budget. You do. Everybody does.” And then they start to treat me like a priest, full of confessions.
I try to avoid it but sometimes it’s unavoidable. Like this morning.
I was talking to this lady, and she was telling me how she was good with money. Great!
No debt other than her house. Awesome!
And every month she puts everything on a credit card and pays it all off. Hold up.
There is nothing wrong with credit cards. We use them. But if you are spending money on a credit card and then earning the money to pay it off, you are riding the credit card float. We’ve talked about this before. And it surprises a lot of people to know that if they are riding the float, they are essentially living paycheck to paycheck.
I’m not sure I got through to this lady entirely. But hopefully I got her thinking a little bit.
It’s easy to feel like you are doing OK, if you aren’t carrying debt month to month. And maybe you are.
But the best measure of your financial heath is to think about your future self: will your future self be OK with how you’re setting them up?
Do you have an emergency fund? Are you anticipating larger less frequent expenses? Will you be ready to retire? I heard the other day that 85 percent of your health care costs are consumed in the last two years of your life. Crazy. Think about that. Will your future self be ready for that?
So if you want to gauge your financial health, consider whether or not you are creating a safe future for yourself. How are you setting up your future self? When you start measuring that way, you might see cracks in the scaffolding of your financial house.
If you want to pay for you kids for college? You start thinking future.
If you want to retire on ocean front property? Big time future.
If you want to be able to pay cash next time you get a flat tire? Still the future.
To really be set up financially, it is almost entirely about future planning. How far you think ahead is a good indicator of how safe your finances will be.
Think about what you want things to look like in a month, a year, five years, ten years and start planning.
If you look through a future lens, you might find you aren’t quite as set as you might have thought. Don’t stress about it—just think about what you want and how do you want your future to be and take action.
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Until next time…