Proactive turns into Reactive Backstory

I still remember the day in Catacamas, Olancho when we were working Honduras. I was in the group kitchen getting everything ready to feed the work team from the States. I arrived a few minutes earlier than normal and turned on the commercial griddle on the oven to heat up to make pancakes. Making batter and pancake griddleIt usually took a little while to reach the right temperature. I began to get the batter mixing in the Kitchen Aid, and then went back to the oven and put my hand above the griddle to make sure it was hot enough. I didn’t feel any heat! I immediately turned the griddle portion of the oven off and looked beneath. The pilot lights were out. I had grown up cooking on a residential electric stove/oven. I was a city girl in the country trying to do my thing. I wasn’t about to wake anyone up to light the pilot lights for me because I knew I could figure that out on my own. I reached under and got them lit. I remember thinking I should probably wait a few minutes to let the gas get out of the lines before turning the griddle back on again. I proceeded to work on the pancake batter and got the coffee started. I waited as long as I could, then went back and turned it on.

The next thing I knew, I was picking myself up off the ground outside the kitchen! The blast had come out of the gas lines of the stove and thrown me through the kitchen screen door. I quickly ran to our house (we were on a campus like setting). I felt as though I was still on fire. I had lost a good portion of my hair, my entire face and some of my upper body had been burned. I was pregnant with our youngest child at the time and was more concerned with her safety than I was anything else, so I was unable to take any medicine for pain to get me through the entire ordeal.

Looking back, I still wonder why I even decided to use the griddle or oven that morning. Had I just changed up the menu for the morning and made scrambled eggs instead of pancakes, there would have been a much happier outcome. However, I couldn’t turn back time.

Reacting to Personal Finances

Personal finances are similar to this story. There are many times when we know we shouldn’t do something, but we plunge forward anyway. We can’t afford something, yet we have the burning desire to have it NOW. The rent or mortgage is due the same day each month and we know how much it is going to be, but we really wanted to go out to eat or have a vacation. Now our budget is short that amount of money.
Personal Finances Fail: Empty Wallet with Purchased Items on Table

In these situations, items are charged to a credit card or paid for with money that should have been allocated to a monthly bill. I’ve seen people purchase a vehicle which is out of their price range and the lifestyle changes needed to fit it into the family budget created stress and frustration. The consequence, much like me getting physically burned is much the same. We have to wait out the time period to make ourselves healthy again. In the physical aspect, I had to wait for my burns to heal. I looked horrible for a while because my hair had to be cut very short. The cream I needed to have on my face turned black and looked bad. For those who make poor choices with personal finances or credit card debt, spending behavior needs to change to compensate for the mistake made. This may look bad on the surface as the repairs take place in the bank account.

Proactive Budgeting

If we can take the time to allow our minds to think through an entire purchase and how paying for it will affect our personal finances, we would be much better off. It can take months or even years to recover from a financial mistake.

Step 1: Prepare a monthly budget outlining every area of the family spending from housing needs down to entertainment and birthday gifts.

Step 2: Analyze the budget for a given time period to see if you end up balanced at the end of each month or if you spend more than you actually make. Make the needed changes to get a balanced budget.

Step 3: Before a major purchase, play with your budget to see if there is room to pay for a desired item or if you need to spend less in another area. For example, say you are contemplating getting a new car and you know you only have $100 a month extra in your budget. You will need to add the amount of the new car payment plus full coverage insurance. How much will you be short in your budget and where can you cut out other expenses to make the car happen? This might mean spending less on eating out, groceries, cable, gifts or entertainment. It might even change your mind on the type of car you want to purchase so you don’t have to make all of these sacrifices.

Step 4: You can now go into the new purchase with your eyes wide open and knowing where you will stand once you put the new item into your budget.

Follow these steps and you’ll be thinking proactively, not simply reacting to the situation you find yourself in next.

I challenge you to think through purchases well in advance to make sure you still feel the need after giving it some time. If you are a credit card user and only paying the monthly payments, this means you have lived outside of your means. Try living within your means for a few months and see how tight it really is. Once you’ve met the challenge, start gaming your monthly budget until you can make a dent in the credit card debt.

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