You might have noticed from last week’s exercise that you spent all of your money. That’s why your bank account has nothing. That’s why your credit cards are maxed out. That’s why you feel this enormous amount of pressure to make more money to get out of debt.
Now that you know where your money went. You need to start identifying where most of your fat is and begin cutting that fat out of your life.
What is fat? Fat is all the money spent on luxuries. We need to go back to the basics. Its time to start living your life based on necessities.
1. Make a list of all the necessities you need to SURVIVE. Think like you are a homeless person trying to make it one more day. (Cable and starbucks coffee and cellphones are NOT necessities-Think Housing, Heat, Water, Food, minimums on credit cards)
2. Add up the transportation money, food, home, heat/hot water and subtract your monthly income. The rest is all fat.
3. Print out your bank statement and start highlighting the following. Begin determining what is a luxury and what is a necessity.
-Yellow: Food (should be $20-25 ONLY per week per person)
-Pink: debt payments
-Blue necessities: (rent/utilities/transportation)
-Purple: Gas
-Orange: The Fat (all the money you spent on foolish things)
Here are some examples of luxuries: Starbucks coffee, going out to eat, organic food, thousands of options for breakfast, lunch and dinner in your fridge, hair dressers, driving to a thousand places wasting gas, buying gifts for someone (That guilt you feel is your ego, let it go. There are other ways to show people you care), If you need a cellphone, does it have to be the new iPhone 6?
4. Make a list of all your necessities in each category because next week we are going to create your budget.
Leave me a comment, what were some of the things you spent money on that you felt were necessities?