basic financial planning #9: A little exercise/

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Blog entry by BigTiny posted 03-20-2011 12:05 PM 3997 reads 0 times favorited 6 comments Add to Favorites Watch
« Part 8: know the tax codes Part 9 of basic financial planning series Part 10: Getting a jump on going pro »

As the title says, this is a little exercise. Don’t worry, you don’t need gym equipment for this exercise and you shouldn’t even break a sweat.

This is a financial exercise to prove a point, mainly that you don’t know where a lot of your money goes.

Now for the details… If you decide to actually do this, no cheating please. You’ll only be cheating yourself

I want you to get a new pocket sized note book. In this book you are going to list every penny you spend over the next week. Every penny! List the date, time, amount and what it was spent on. The amounts should be in the right hand column and either in a different color ink or in bold or underlined so they stand out and won’t be missed.

At the end of the week, total up all the money, and then do a total of the purchases you didn’t absolutely need. Now figure that out as a percentage of the total. That last figure is the one that will raise a few eyebrows.

Now when I say “absolutely need”, I do not mean a cup of coffee because you were having a caffeine jag. I mean things you really need, either as a home expense or a business expense.

Nobody needs to post their results here. This is strictly between you and your conscience. I think the results will surprise many of you. I ran this exercise in a company head office once, for the senior members of the company, and the average amount that fell into the “miscellaneous” file was about 30%. In other words, about one third of all they spent went on things they didn’t need. Guess where the first place to look for extra money for something you want, like a new tool or some nice hardwood might be? You got it, first try! That unexplained drain on your wallet.

I know doing this is inconvenient. That’s why I use a week as the time period instead of a month which would be even better as the amounts are larger and have a bigger impact. Still, give it a try and see where you can cut out some little drains that add up over time, and redirect that money to a more constructive use.

Have a great today and a better tomorrow.


-- The nicer the nice, the higher the price!

6 comments so far

View Sheila Landry (scrollgirl)'s profile

Sheila Landry (scrollgirl)

8979 posts in 2336 days

#1 posted 03-20-2011 12:53 PM

Hi, Paul:
As you know I am going away this week on a business trip for several weeks. I am going to pass on this exercise until I get back and my life gets back to “normal”.

However, with that being said, I want to tell you how much I agree with you as to how important this type of thinking is. Several years ago, I found that I was a bit overextended financially. It filled my life with stress that could have been easily avoided had I been thinking along these lines.

Since getting things under control, I have adopted a ”want vs. need” strategy that I do live by every day. If I see something that I am going to buy, I stop and ask myself “is it a want or a need?” and I take a closer look at the big picture of my life (can I really afford it if it is a want?) This only takes a few seconds, but has saved me a LOT of money and helped me make some better financial decisions that would have otherwise caused me stress.

Now I am not saying that I never choose the “wants”, but I do so when it is appropriate for me to do so (when I can afford them!) and helps me stay out of trouble. It is good to be honest with yourself in this way and a great habit to get into.

Great advice from you! :)


-- Designer/Artist/Teacher. Owner of Sheila Landry Designs ( Scroll saw, wood working and painting patterns and surfaces. "Knowledge is Power"

View davidroberts's profile


1025 posts in 2902 days

#2 posted 03-20-2011 03:57 PM

Good topic. I propose another column labled “What were you thinking”, as in “WHAT WERE YOU THINING, YOU BIG DUMMY”

-- Better woodworking through old hand tools.

View Shopsmithtom's profile


787 posts in 3611 days

#3 posted 03-20-2011 07:23 PM

That IS a great exercise. I used to use that tool back when I did financial planning to help families find the money they needed to either invest for retirement or insure for needs. It’s amazing how much money we all fritter away on stuff that is relatively unimportant.
Now that I’m not doing the planning stuff any more, let me put it in a way that we LJ’s can relate to: Do this exercise for a month and see how much fluff you have in your budget, then use that money you found to go out & buy a new tool for your shop. -SST

-- Accuracy is not in your power tool, it's in you

View Div's profile


1653 posts in 2357 days

#4 posted 03-20-2011 09:51 PM

Hey Paul! A Very good suggestion indeed. I’ll certainly give it a go. Now, I am just wondering if I can convince SWMBO to do the same….

-- Div @ the bottom end of Africa. "A woodworker's sharpest tool should be his mind."

View lanwater's profile


3111 posts in 2350 days

#5 posted 03-21-2011 06:12 AM


I am sory to say that I am going to cheat before even starting…

I mentally did the math and everything related to tools and woodworking was in the absolutely needed(I don’t make a penny from woodworking).
Clothing, food etc… was somewhat needed.

Seriously that’s a great excersise to do.


-- Abbas, Castro Valley, CA

View BigTiny's profile


1676 posts in 2305 days

#6 posted 03-22-2011 02:09 AM

I used to tell people that if they see something they just can’t live without, go back tomorrow and buy it.

You’d be surprised how often something you just can’t live without today you can’t be bothered going across the road to buy tomorrow.

-- The nicer the nice, the higher the price!

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