Chapter 3
How to Save a Lot of Money!
It's better to look ahead and prepare than to look back and regret.
—Jackie Joyner-Kersee
IN CHAPTER 1, WE DREAMED ABOUT where we wanted to get to (our goals). In Chapter 2, we identified where we are today (our net worth). In this chapter, we're going to look at what resources we have to help us get from where we are today to where we want to be. The process of identifying what we have to enable us to reach our destination occurs when we prepare a budget. Yes: the “B” word!
What Is a Budget?
A budget is a record or projection of all the money coming into the house and all the money going out of the house. It is also known as a cash-flow statement. This term makes it easier to visualize: money flows in and money flows out. Unfortunately, more money tends to flow out.
Why Is a Budget Important?
A budget is paramount to financial success!
You need to know how much money you have and what it is being spent on to be able to prioritize spending and allocate funds toward different goals. Whether the goal is retirement, travelling, buying a new car/house/boat, the kids' education, paying off credit card debt, or even a wedding, you need to understand where you will get the money from to pay for these things.
The hardest part of the process is to figure out the answer to: “Where am I spending all my money?” You may have a mortgage or rent a house. You likely have to pay utilities, such as water, heat, electricity, cable, internet, phone, cellphone, ...
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