A Budget: The Key to Your Financial Success—Part 1

Financial concepts are slippery things. After all, they can’t be touched or visually examined. To be fully appreciated, they must be imagined. Although this small but necessary feat of mental dexterity can make the economic logic of budgeting seem fuzzy, it’s important to map out an economic game plan that, on a month-to-month basis, clearly identifies how much money you intend to spend and save. This is a useful ongoing exercise because great wealth seldom materializes by itself and accidental millionaires are extremely rare. But take heart, you can amass a sizable fortune over the course of your life with even a modest income. Only, chances are, if you eventually succeed in doing so, your striking it rich later on will be a direct result of careful financial planning, continued personal sacrifice and tireless persistence. You see, when it comes to saving money and inflating a personal balance sheet, doggedness pays off. Believe-it-or-not, if you establish good money habits now and aggressively save and invest throughout your teens and twenties and beyond, you’re likely to attain an enviably high future net-worth. All it takes is a bit of determination and a willingness to make sound financial decisions in your day-to-day life. A budget makes economic miracles possible because it provides a largely self-imposed framework that, in turn, will enable you to relentlessly focus on and ultimately achieve major financial goals. Moreover, a budget will keep you on track and prevent you from blowing great gobs of money on stuff you don’t really want. To understand why a budget is crucial to your economic progress, it might help to compare a budget to something else entirely; something tangible that’s easier to relate to and identify with. What sort of everyday item embodies the potential and promise of a budget? Strangely enough, it’s a car… Though, at first glance, a budget and an automobile might seem to have nothing whatsoever in common, there are striking similarities between them.

Essentially, budgets and cars are vehicles. What differentiates them, however, is the type of transportation they provide. Whereas an automobile is a complex marvel of engineering that converts gasoline into transportation, a budget is an equally intricate and useful device that harnesses the power of an income and channels it toward any number of short-term, intermediate and long-term economic goals. Now, as you speed down life’s highways and biways, the destination is often a place; with a budget, however, it’s a financial goal. Granted, the anatomy of a budget and a car look nothing alike; but if you overlook this superficial dissimilarity and view them instead as elaborate mechanisms whose productive output requires the successful and well-timed coordination of many different and loosely interrelated parts, their similarity is immediately apparent. Just as a glimpse under the hood of an automobile’s idling engine compartment will reveal a puzzling tangle of wires, hoses and oddly shaped mechanical parts, an X-ray view of a working budget’s moving internals reveals an equally active dynamic, one that consists of carefully controlled, frequently monitored and constantly shifting cash flows which, in turn, support your goals and priorities. If you design and stick to a budget–which, make no mistake, isn’t easy–your day-to-day economic choices will gradually foster a deeper and more meaningful sense of personal satisfaction and fulfillment.

Of course, to operate at peak efficiency, cars and budgets require periodic tweaking and maintenance. With automobiles, the oil has to be changed and routine maintenance must be performed. Similarly, for a budget to operate at peak efficiency and produce optimal results, it too must be periodically monitored and adjusted. Sudden or dramatic changes in personal economic circumstances–which can include anything from violent fluctuations in spending to hiccups in income will, for better-or-worse, affect your progress toward financial goals. So, from time to time, you’ve got to pop your budget’s metaphorical hood, reach for the appropriate tools, and tinker with it until it’s once again producing desired results. On the road of life, cars and budgets are essential tools; if they’re properly cared for, they’ll take you wherever you want to go.

Alas, scarcity is one of money’s many qualities. Disappointingly, dollar bills don’t sprout like leaves from trees or erupt from cracks in the sidewalk like weeds. In theory, managing money sounds deceptively simple; in actual practice, it’s anything but—and there are many reasons why. As people distractedly going about the hectic hustle and bustle of everyday life, it’s often easy to forget that we’re continually bombarded by all manner of commercial stimulus. Meanwhile, each of us is inwardly nudged and outwardly cajoled by a shrieking cacophony of wants and needs. With enough money or even the right kind of plastic in one’s wallet, the urge to splurge is understandably difficult to resist. Which brings us to the crux of the problem: it’s extremely difficult–no, impossible–to satisfy an infinite number of wants and needs with limited financial resources. Establishing priorities is what budgeting is all about.

For many, when it comes to making financial decisions, there’s a natural tendency to fixate on satisfying immediate desires at the expense of longer-term goals. Admittedly, the thought of blowing money willy-nilly with no regard whatsoever to future consequence is, at times, powerfully seductive. Like a strictly regimented diet of ice-cream sundaes, the idea is appealing. Problem is, there’s a significant and widely overlooked downside to reckless binge spending. Such behavior seems satisfying but it has unsavory long-term consequences, namely: AFD (Acute Financial Discomfort); the telltale symptoms of this debilitating condition include an inability to save and a tendency to spend more money than one has.

Peeling back the layers of the decision making onion, consumers’ financial choices are guided by numerous factors, and few of them are positive. Social circumstances play a significant but hard-to-quanitify role in establishing the overall tone and tenor of consumers’ relationship with money. Conspicuous consumption is a term sociologists coined long ago to describe a curious but widely observed phenomenon: people spend lavishly on goods and services in an (often futile) attempt to elevate their standing among piers, acquaintances, and, in some cases, complete strangers. For America’s consumer class, maintaining appearances and keeping up with the Joneses is an exhausting full-time effort. It’s worth emphasizing, however, that numerous studies suggest that the link between consumption and happiness is, at best, tenuous. An informative article in The Economist (12/23/06), which examined the murky interrelationship between wealth and happiness, ultimately concluded, “…People quickly grow accustomed to whatever they have—however much of it there is. Moreover, having lots of things isn’t necessarily enough if other people have more. A rising tide lifts all boats but not all spirits, giving rise to a kind of status-anxiety.”

Interestingly, the unlikely field of neuroscience also has something to say about the addictive nature of spending; MRI studies of the brain show that spending money triggers the release of intoxicating pleasure chemicals to the brain. So, because of our fixed neurological hard wiring, there’s a biological explanation for consumers’ economic spendthrift ways. And if all this wasn’t enough to entice shoppers to empty their wallets and stimulate the national economy, there’s another game-changing factor in the mix as well. There’s this industry called advertising. It’s a thriving multi-billion dollar business and it’s how companies large and small compete for consumers’ dollars. Make no mistake, in the no-holds-barred arena of free-market Beyond Thunderdome capitalism, a war is indiscreetly being waged for your dollars. Ever set foot outside of your home, turned on your computer, listened to the radio, answered your telephone or watched TV and been overcome by the feeling that someone somewhere is desperately trying to sell you something? In an economy that’s addicted to profits—which, in turn, requires a steadily escalating level of sales activity—advertising is virtually inescapable. It’s slyly affixed to coffee-cup sleeves; the once blank side of that scrap of paper that’s stuffed into fortune cookies; the rooftops of taxi-cabs; the sides of buses; the periphery of sports stadiums; magazines, and even restroom stalls. As Kalle Lasn, co-founder of Ad Buster’s magazine, rightly points out: “From the moment you awake in the morning you’re assaulted by commercial stimulus. In fact, on average, about 3,000 marketing messages seep into the average North American brain every day.” Susan Douglas, University of Michigan’s Communications Professor, is credited with this clever quote: “Advertising–which is the bread, butter, jam, and mother’s milk of media–has afflicted Americans with a perpetual unease that can be momentarily appeased but never quite satisfied with future purchases. Advertising is designed to sell us envy, and the person we envy is the future self we become if we purchase goods and services.”

So, with a brain that’s hard-wired to spend and so many disparate factions noisily clamoring for your cash, the simple act of hanging onto it occasionally requires a heroic act of self-restraint. Sure, it’s important to smell the flowers and enjoy life now (which means engaging in a bit of retail therapy every now and then), but it’s equally important to develop and strengthen the fiscal resolve necessary to deny these irksome impulses and build personal savings. This is essential if, over the long windy course of your economic life, you want to build the sort of rock solid balance sheet that will enable you to comfortably weather unforeseen monetary setbacks and achieve lasting financial peace of mind. But here’s the kicker: reconciling the need to live large now with the seemingly less urgent need to scrimp and save for the future isn’t easy. It requires striking a sensible balance between hedonistic abandon and Spartan frugality. Unfortunately, this is all but impossible to do if you’re not carefully monitoring daily expenditures. So, the next time you’re next-in-line at the convenience store checkout counter, take a few deep tantric breaths and get a death grip on your economic chakras. Start by creating a shopping list that includes all of the items you’re going to buy well before setting foot outside of your home to run errands. And don’t deviate from the master plan. When creating a shopping list, it’s important to differentiate between a “want” and a “need.” Don’t confuse the two… Although the difference might seem hazy, needs include things like food and shelter. They’re biological necessities and are essential for survival. Wants, on the other hand, fall into that vast category of prospective purchases that can be safely put-off for another time. Bertrand Russell said it best: “To be without some of the things you want is an indispensable part of happiness.”

In short, the simple act of spending money is a frustrating one-step-forward-one-step-backward proposition. Although a purchase may fulfill a desire in one area, it simultaneously lessens your ability to satisfy other (and perhaps even more worthwhile) wants and needs. Obviously, the dollars you spend won’t miraculously regenerate in your wallet’s bill fold once they’re gone. Replacing the money you’ve spent means having to earn it all over again. Think about all the stuff you bought last month. Now, if you had it all to do over again, would you still want the stuff you bought or would you rather have your money back? Keep the answer to this question firmly in mind next time you’re considering a purchase. You see, money is very much like life itself; it’s the lifeblood of your time and labor–both of which are scarce and, no-doubt, valuable. The upshot? While budgeting may seem to be about dollars-and-cents, don’t be fooled, a budget is really about a lot more than that. It’s about your life—and getting more out of it. It’s about dreams and priorities; having them, holding yourself relentlessly accountable to them, and never shrinking from the trivial sacrifices you must make to achieve them.

Now, if you’re eager to whip your financial house into shape but haven’t made much progress because you lack an actionable game plan, take heart, the whole process begins and ends with you. Sadly, no external power is going to formulate a winning economic strategy that’s tailored to your individual preferences and miraculously beam it into your consciousness. Creating a functional budget, one that delivers results over time, is a highly iterative, sadly imperfect and profoundly introspective process. Make no mistake: self-assembly is required. So, be prepared to hunker down and roll up your sleeves. If you need a starter dose of economic reality, start by tallying your financial assets. Next, total your liabilities. Now, put both on opposite ends of a cantilever scale; wait patiently, and see what happens. If your assets outweigh your liabilities, congratulations, you’re among a proud minority of frugal-minded folks with a positive net-worth. Conversely, if the opposite is true, and your liabilities exceed your assets, don’t worry, you’re in good company. Many Americans, not to mention Uncle Sam and a good many U.S. cities and states—are right there with you.

The next step in the economic self-appraisal process is crucial. No matter how dreamy or dire your financial situation might appear, don’t dwell on it. From here on out, the future is your focus. Though the particulars of your economic present may seem paramount, trust me, the financial direction you’re headed is, over time, far more important. Creating and sticking to the parameters of a sensible budget is the single most important step you can take to seize the reins of your economic destiny. If you devise a budget and allow ample time for it to produce results, you’ll eventually look back in awe at your economic progress. But, before reaching for a calculator or applying pencil to paper to create a winning financial strategy, you should know up-front that budget minded living isn’t easy—especially at first. It’s a trying and sometimes heartbreaking challenge. It will test the limits of your resolve. On a cheerier note, if you stick with it, you’ll discover that the benefits of earning, spending and saving according to a specified plan are well-worth the effort and sacrifice. Just don’t expect instant gratification or flashy overnight results. A budget is a process. It’s effective, but it works slowly and it requires considerable patience and persistence to produce meaningful results…

Putting your financial life on stable footing requires following a simple multi-step process. First, figure out how much money you earn. Next, determine how much money you spend. If you blow cash with the reckless abandon of a drunken sailor on shore-leave, that’s a behavioral problem you’ll have to acknowledge and work on. Once you’ve quantified your income and expenditures, don your heartless CFO hat and trim unnecessary expenses. Once you’ve developed the discipline to live within self imposed spending constraints and know your income, do whatever it takes to ensure that they’re harmoniously balanced. Once you’ve accustomed to living within your means, take a deep breath and steady yourself for the next crucial step in the wealth building process. Tighten your financial belt a notch or two and strive to save at least one out of every ten dollars you make. Don’t blow this money; save it (preferably, in a high interest bearing FDIC insured money market account. For ideas, check out bankrate.com)–religiously. If socking away 10% of your income isn’t doable then, by all means, adjust your savings goal to suit your personal circumstances. Once your financial metabolism has reached a productive equilibrium and you’re comfortable spending less and saving more, you’re economic progress will gradually snowball. Before long, it’ll take on a virtuous and largely self-sustaining momentum of its own. And here’s the good news: saving money isn’t only financially rewarding, it’s emotionally habit forming. Even modest financial progress emboldens a sense of confidence that will pay monstrous dividends over time. In the not-too-distant future, the once unthinkable chore of scrimping and saving becomes oddly addictive as you begin to achieve goals and watch your net-worth rise.

No matter how difficult living within the cramped confines of a budget becomes, however, stick it out for three weeks. Behavioral experts say that it takes most people about this long to jettison old habits and reinforce new ones. Ironically, when adjusting to the realities of a budget-minded living, the only thing worse than saving too little is saving too much. Though this might seem wildly counter-intuitive, it’s not. Remember, for a budget to evolve into a lifestyle, it has to be livable. Much like a diet, binge saving leads to binge spending—a common and counter-productive form of self-sabotage. So, when whittling away at expenses, don’t go overboard. Give yourself plenty of wiggle-room. Accept small-scale cheating every now and then as a natural and perfectly healthy byproduct of an otherwise functional process. From time-to-time, you may fall off the budget wagon. Fine… Don’t beat yourself up or waste energy agonizing about it. Simply recognize the error of your ways, dust yourself off, and jump right back on. After all, in the grand scheme of life, it makes little sense to grimly scrimp and save for the future only to party like a rock-star at the ripe old age of 80. Conversely, it’s equally senseless to squander every penny living for the now only to discover—moments after blowing out the candles on your 80th birthday cake–that you haven’t a pot to piss in. Ironically, everybody wants to live a long life but few people save enough to age gracefully in retirement. Just hope that 80 (if that’s the lifespan you’re budgeting for) doesn’t become a momentary rest stop on the bullet-train expressway to age 100. When you take inflation’s long-term wealth withering affects into account, a desirable quality of life three to five decades from now will easily cost a million bucks. Which is why you should aggressively and proactively plan and save for your golden years; and you should do so now–don’t procrastinate. If you’re female, it’s especially important for you to prudently manage your finances because (according to actuarial data painstakingly compiled and analyzed by life insurance companies, which are in the business of knowing such things) women often outlive men—and by a significant number of years. Though on one hand this is certainly news worth cheering, longer life-expectancies imply a much greater lifetime savings burden. Essentially, the longer you intend to live the more money you’ll need to live well. Don’t believe me? A study by AARP makes a compelling argument: though only 12% of our nation’s elderly live in poverty, 74% of them are women. Want to know how lengthy a lifespan you should budget for? Gather up your medical history and check out www.livingto100.com…

In short, it doesn’t matter if you’re male or female, young or old; everyone needs a budget. Fortunately, they’re a cinch to create because they involve only two key variables. And luckily, you control both: financial inputs (whatever money you make) and financial outputs (whatever money you spend). Let’s start by examining the financial output side of the budgetary equation. In life, there are expenses. Though some are overwhelmingly huge, most are small. By and large, Americans’ biggest expenditures are those associated with keeping an automobile on the road, food on the table and a roof overhead. Of course, smaller expenses have a not so funny way of adding up. Personal perks and creature comforts—money spent on things like gourmet coffee, an evening at the movies, electronic gadgets, fashionable threads, trendy hand-bags, chichi shoes, savory restaurant meals, and countless other things—can sabotage a budget. For many, it’s the steady accumulation of many small and seemingly trivial expenses that prevents them from making long-term economic progress.

A Budget: The Key to Your Financial Success—Part 2

Preventing personal spending from spiraling out of control is the main reason why budgeting is necessary to begin with. If you’ve never created a formal written plan for earning, spending, saving and investing, the best way to begin is by tracking daily expenditures. Woody Allen once remarked that 80% of success is showing up. Well, if that’s true, then 80% of financial success is keeping track. No expenditure is too small to be accounted for. Once, a friend of mine flipped a quarter into a cascading fountain and noted the miniscule expenditure in her spending diary under the heading of “wishes.” Though many people assume that a huge paycheck or a staggering windfall of cash would bring a swift and permanent end to their financial woes, nothing could be further from the truth. And the facts bear this out. Often times, lottery winners blow their newly acquired fortunes (perhaps because they don’t feel worthy of them) only to end up flat broke. Sly Stone’s life story is a stirring testament to life’s shifting fortunes. Once a wealthy and famous singer, she’s now living in a camper van in Los Angeles recording music on a laptop. It’s mildly comforting to know that fiscal recklessness isn’t exclusively a U.S. phenomenon. It’s a quirk of the human condition that transcends cultural and national boundaries. Consider the story of Michael Carroll, a British sanitation worker who, after winning the lottery in 2002, blew $15.2 million on drugs, prostitutes, parties and extravagant gifts for friends and family. Of course, these and many other unreported stories play out across many peoples’ lives. Such outcomes are surprisingly common among the lucky few who, out of the blue, strike it rich. According to the National Endowment for Financial Education, 70% of those who come into a windfall squander it in just a few short years. Although six and seven figure incomes are hugely popular and aggressively pursued, stratospheric compensation levels offer an equally illusory sense of economic invincibility. Celebrities (Michael Jackson, Robin Leach and Ed McMahon are notable examples) and professional athletes (Mike Tyson) have achieved tremendous earning power throughout their storied careers only to outspend their lofty incomes and end up flat broke.

The bottom line: it doesn’t matter how much wealth you have or how much money you earn, how you manage money is what matters most in the long-run. If there’s a secret to nurturing a personal balance sheet and achieving economic security, it lies in focusing on your attitude toward and relationship with money. This is well worth dwelling on because it’s going to help or hurt you for the rest of your life. If you’re serious about money, and intend to have a lot more of it in the not-too-distant future, you’ve got to worship at the church of spending less and saving more. You see, nothing screams wealth like a well pinched penny. It helps to think of an income as a modest trickle of water dribbling from the nozzle of a financial garden hose, one that’s been mischievously pin-pricked with lots of tiny holes. Now, the many arcing rivulets of water that are spouting-off along the length of your garden hose represents non-discretionary spending. This is whatever money is left after essential living expenses like food and shelter are deducted and state and federal income taxes are paid. What’s left over is yours to do with as you please. Let’s call this notably diminished remainder your disposable income. Now, if you look around, you’ll notice that there’s a wealth bucket lying on the ground beside your bare wet grass speckled feet. You do want to fill your wealth bucket, don’t you? Certainly, good things come from doing so. Needless to say, most people want their wealth buckets to fill as quickly and efficiently as possible. Should you share this particular aspiration, you’ll need to inspect the condition of your wealth bucket very carefully. Is it too riddled with holes? If so, are they gapingly large? This is a million dollar question because, if the cash flow trickling out of your financial garden hose sloshes into your wealth bucket only to swish through a bunch of holes and hydrate the lawn then it may never fill. The holes in your wealth bucket represent discretionary spending: money spent on wants–not needs… Luckily, it doesn’t take an MBA or an overpriced Ivy League education to know that your wealth bucket won’t fill quickly unless you locate and patch those holes. Interestingly, although everyone has the metaphorical equivalent of a wealth bucket, few of them hold water. The systematic process of locating and patching the holes in your wealth bucket is what we’ll focus on next.

Isn’t it wonderful how technology has, for the most part, made our lives easier? Compared to the prohibitively time intensive and painstaking chore of tracking one’s income and expenditures the old-fashioned way (with pencil and paper), the advent of personal finance software represents revolutionary progress. Thanks to the awesome number crunching power of personal computers, the growing popularity of online banking, and the ease with which financial statements can be quickly and securely download, the hi-tech tools needed to systematically track and manage the smallest details of one’s financial life have never been more broadly accessible. No matter how complicated or fragmented your financial situation might be–and it really doesn’t matter if you’ve got one or multiple credit cards, different saving and checking accounts, and a smattering of brokerage and/or retirement accounts–you can easily consolidate information from all of these disparate sources onto one easy-to-reference place. Because, in theory, there’s a very rich and fulfilling life to be lived outside of tracking the tedious ebb-and-flow of your money in your life, it’s a good idea to make personal finance software the central hub through which the varied spokes of your financial life pass. Personally, I find Quicken’s Premier to be quite useful. Of course, it takes time and effort to install and familiarize yourself with the software and its handy features; but, once you have, with the push of a button and click of a mouse, you’ll be able to generate a comprehensive record of all financial activity on all of your accounts. A credit card charge from Chevron, for instance, will automatically appear in a spending report under “fuel costs,” an automobile expense subcategory. Similarly, restaurant charges can be easily found under “dining out” expenses. With this detailed information at your fingertips, you’ll know exactly (down to the penny) how much you’ve spent on everything from coffee and gasoline to electricity and groceries—and everything in between. What’s more, should your expenditures exceed preset limits, the software can alert you. With such a system, you’ll always be in the know about your money and can adjust your spending by the right amount to get back on track. To make the fire-hose torrent of data that personal finance software collects and dispenses easier to interpret and analyze, customizable reports can be exported to excel for further study. Haven’t got room in your wallet for high-end personal finance software? No problem; Yodlee Money Center and Mint are free (albeit less robust) alternatives. Bundle.com (a venture jointly sponsored by Microsoft, Morningstar and Citigroup) offer valuable perspective on other peoples’ spending patterns. For instance, it can show how your spending in a given area of your budget compares to averages in your neighborhood–by zip code. Click on “Everybody’s Money” and you’ll see how your expenditures on restaurants, groceries, transportation and clothing compare to others’ in your community.

Though personal finance software conveniently eliminates much of the mind numbing hassle of tracking and managing the intricate details of your financial life, its most glaring defect is that it can’t account for cash spending. Until the talented software engineers who create personal finance software products design an omniscient version, it can’t determine where your cash disappears to once it’s been withdrawn from a bank or ATM and spent. Lest you think otherwise, this functionality glitch is shared by all personal finance software products that are currently available for purchase. But don’t despair. If you suffer from obsessive compulsive disorder and simply won’t be able to sleep at night unless you know where every nickel goes, there’s a clever low-tech solution. When withdrawing cash from a bank or ATM, keep the receipt. This scrap of paper, which is often tossed in the trash, has the date and amount of each withdrawal printed on it. Stash this valuable piece of paper somewhere in your wallet’s bill fold and keep a pen handy at all times. This way, as you spend cash, you can note on the back of your ATM receipt how much you spent and what you bought. If you stay on top of this manual accounting system, you won’t have to wonder where your dollars went. You’ll have a complete record of all your cash spending. When you’re wallet eventually empties, you’ll have a detailed summary in the form of hand written notes. Keep your used ATM receipts in one place so that, at the end of each statement cycle, you can manually key in your cash spending along with downloaded transactions.

Do you find that money is frustratingly hard to come by? Luckily, there are many ways to make due with less. Keep a watchful eye out for that blue packet of coupons that’s delivered to most household mailboxes once a month. If you accidentally discarded it along with a fistful of junk mail, don’t worry, they can be viewed online at www.valpak.com. Simply enter your zip code, and, from the comfort and convenience of your own home, you can browse and print money saving coupons on everything from oil changes and dental cleanings to restaurants and lawn care. Still not satisfied? Other penny pinching sites (FatWallet.com, Active-Freebies.com, SlickDeals.net, CouponMom.com, MyGroceryDeals.com and CouponMountain.com) are a bargain hunter’s delight. When was the last time you shopped for a better deal on your automobile insurance? Even if you can’t negotiate a better price on your auto premium, you can save money by raising your deductible. This is the amount you must pay up-front before your insurer will cut a claim check. Are you tooling around in a beat up old clunker that looks like something tnhat belongs on the set of Sanford and Son? If your car’s replacement value is somewhere between nada and zilch, eliminate the portion of your auto policy that compensates you for damage to your vehicle if it’s damaged in an accident. This too will reduce your auto premium. Still wasting almost fifty cents in postage on every bill you pop in the mail? Sign up for online bill pay services. Over time, you’ll save a bundle on unnecessary postage, envelopes and check printing costs. Is the entertainment portion of your budget constantly kicked in the shins by video rental charges? Nowadays, public libraries carry more than books, newspapers and magazines. Many carry an assortment of movies on DVD that can be checked-out for free. Looking for cheap thrills in the big city? San Francisco’s Museum of Modern Art and the Academy of Science offer free admission to the public the first Tuesday of every month. Living richly doesn’t necessarily require great wealth you know; parks are lovely and wonderfully inexpensive places to spend time in the great outdoors with friends. The bay area has an abundance of scenic trails that quietly beckon and invite hours of leisurely exploration. Are you a college student? Do textbook prices send you into a state of catatonic shock? If so, you can save a bundle by not purchasing your textbooks at the campus bookstore. I won’t reveal the extremes I went to as a frugally minded college student to avoid being swindled by unreasonably high textbook prices, but you should look into sites like chegg.com, bookfinder.com and campusbookswap.com. These outfits specialize in textbook renting, selling and buying. The bottom line: if you want limited financial resources to stretch further, you’ve got to find creative ways to spend less.

Now that we’ve covered the financial output side of the budgetary equation, let’s direct our attention to the financial input side. Just as there are many ways to whittle away at expenses, there are just as many ways to boost an income. If you’re an entrepreneur at heart, now might be the perfect time to jumpstart that business venture that’s been collecting dust on your mental workbench. When it comes to transforming a viable business concept into a profitable money-making venture, the Small Business Administration (which offers one-on-one mentoring, financing and all manner of start-up support) can help. Entrepreneurship isn’t your bag? Fine, as Warren Buffet’s shrewd investing exploits have clearly demonstrated over a multi-decade span, you can build an enviable fortune over time simply by kicking your moolah off the couch and making it work as hard as you do. Investing a portion of your savings (money you won’t need in five-to-ten years) in appreciating and cash generating assets like stocks, bonds and real estate–or a sensibly diversified mix of all three–is an effective long-term wealth building strategy. Don’t scoff at the idea of owning real estate. Just because the median price of a goat-shack on the outskirts of the Bay Area is painfully out of reach doesn’t mean you can’t own income producing commercial property. Real Estate Investment Trusts, or REITs, are a perfectly respectable but not widely recognized asset class. Happily, the cost of REIT shares won’t land you in the poor house. Much like a stock, REITs offer investors partial ownership of commercial properties in a wide variety of industries. If none of this sounds appealing, consider going back to school to invest in your professional skills. Of course, these are all tried and true methods of boosting an income. But they often require patience and a considerable amount of time to pay off. If you’re looking for instant income gratification, paid surveys are a good option. Believe-it-or-not, corporations will pay large sums of money to gather thoughtful input from prospective consumers concerning the efficacy and/or desirability of their products and services. Luckily, your two-cents can fetch a lot more than one-fiftieth of a buck. Some companies will pay upwards of $50 for as little as an hour of your time. Google it.

Here’s another nugget of financial wisdom: when it comes to the ongoing struggle to gain financial yardage, it pays to multi-task. In other words, to build lasting wealth, you’ve got to think offensively and defensively at the same time. Can worthwhile money management insights be gleaned from the rough-and-tumble world of professional sports? Can fiscal wisdom be gained from the competitive athletic arenas of baseball, basketball and football? Yes, it can. The basic underlying principles that make for a successful sports franchise can, if rigorously applied to the your pocketbook, make you rich. After all, a football team with a stellar offensive and an inept defensive is sure to lose more games than it wins. High-caliber scoring power is certainly flashy and impressive. But, without an equally competent defense, the game winning potential of a stellar offense won’t be realized. In sports, winning requires a sensibly balanced approach to managing the offensive and defensive side of the ball. The same basic logic applies to creating and protecting wealth. Financial offense (managing what you make) and financial defense (reducing what you spend) are opposite but equally necessary sides of the same wealth building coin.

If income and expenses are the basic building blocks of the budgetary process, personal goals are the real driving force behind it. Unless you’ve got a fire-in the-belly passion for something you truly desire and are willing to sacrifice for, it will be difficult to muster the willpower and resolve to resist giving into countless spending temptations and other distractions that will prevent the budgetary process from bearing fruit. Of course, personal goals vary widely. This is understandable. After all, each of us is driven by a unique and complex combination of desires and circumstances. Moreover, your goals (whatever they may be) are likely to change over time, and they’re likely to do so in ways that will surprise you. That said, not all goals are financial in nature and, opinions to the contrary notwithstanding, money isn’t the measure of all worth. Nonetheless, I’m sure you’ll agree that achieving your life’s ambitions requires accumulating and maintaining a certain threshold of wealth.

To nudge your thinking in the right direction when it comes to assigning money its rightful place in the grand hierarchy of your life, you should know up-front that there’s another (though, to be sure, unfashionable) term for money: fiat currency. In other words (and you might want to sit down before reading further) those ornate pieces of government issued paper that people tirelessly obsess about and fuss over have little-to-no intrinsic value. Fact is, money’s value stems from everyone’s faith in it as a reliable store of value and a universally accepted medium of exchange. Now, if a dollar’s worth is defined strictly by the quantity of goods and services it can buy, its purchasing power is perhaps a good deal less stable than many people suspect. If this sounds absurd, and you’re convinced that the value of a nation’s currency can’t suddenly and violently fluctuate, you should crack a history book and read about how well Germany’s economy performed in the cold winter of 1923. The one-two whammy of a war torn economy and the need to pay hefty war-time reparations dealt a severe and destabilizing blow to Germany’s currency, the Deutsche Mark. A revealing story from this dark chapter of economic history illustrates fiat currency’s true value. Rumor has it that, during the height of Germany’s economic funk, an old woman trudged through the snow carrying a giant burlap sack full of rapidly depreciating Deutsche Marks. She was looking to swap her money for a day-old loaf of bread. On her way to the town bakery, she dropped the heavy sack on the ground to catch her breath. When she’d recovered and was ready to continue on her journey, she saw a pile of loose bills heaped before her. Somehow, a thief had slyly made-off with her burlap sack, leaving her money untouched and piled high on the snow. This story is a stirring testament to the instability of paper—I mean fiat—currency. But I digress; the takeaway point is that the value of the almighty buck (and other forms of government issued money) is supported by two things: 1) peoples’ faith in its dual function as a semi-stable store of wealth and an easy to use medium of exchange, and; 2) our government’s willingness to, if necessary, print oodles more. To be clear, I don’t mean to undermine fiat currency’s perceived value, but rather, to argue that the dogged pursuit of money for its own sake is a hollow endeavor. Which is why it pays to think first and foremost of your life and to make the betterment of that the focus of your lifelong fiscal efforts.

Start by creating three separate lists; each consisting of short-term, intermediate and long-term goals. Remember, when brain storming and cataloging your life’s changing ambitions, it pays to be as specific as possible. Remember, realistic expectations foster achievable results. Examples of short-term goals might include things that, with a modest amount of saving and sacrifice, can be obtained in a relatively short period of time; say, one-to-three months. Achieving intermediate term goals, however, requires a lot more patience and resolve. This list should include items that can be had in six to eighteen months. Realizing longer-term goals is a loftier challenge, but achieving them is also infinitely more rewarding. Examples of long-term goals might include saving for college, funding a ritzy retirement, buying a home or bankrolling the vacation of a lifetime. Once you’ve created a list of attainable goals that you feel passionately about, design a budget and assign it a realistic timeline for success. It’s helpful to write down and post your goals in a place where you’ll see them everyday. This is a subtle yet effective form of reinforcement and a reminder of your true priorities. Budgeting is an imperfect ongoing process, don’t be afraid to make mistakes along the way. The bottom line: it’s your life, it’s your list, and it’s your budget; perhaps it’s time you gave serious consideration to all three.