Dr. Slava Shut

Before you get started with anything, it’s always best to have a plan. If you start with a clear objective and stay on course, you’ll eventually get to your destination. How quickly you get there and how much that journey costs you can help you determine whether or not the trip is worth the trouble.

Even faced with distractions, keeping the original objective in mind can help you stay focused.

But what if you’re not at the starting point? What if you’re already in the middle of something before you realize you’re doing it wrong?

Welcome to Topic Thursday, where we discuss something specifically related to business, finance, or life in general. Today, I want to share a little about about how fixing an unsustainable budget can be more important – and more challenging – than creating a fresh budget from scratch.

Get Started On The Right Foot

First impressions are important because they set the tone for the rest of the interactions following them. If you leave a great lasting idea of yourself in a person’s mind the first time they meet you, chances are they’ll remember that impression when they remember you. 

But it’s not just a recalled image of you that’s important to get right the first time.

Businesses are competing with each other for patrons all over the economy. If a consumer has a choice between two brands, but one leaves an awful first impression, that will likely effect their choices in the future. From this perspective, the strategy to always make the best first impression with everyone is usually the most successful.

The same concept works with budgeting. I know what you’re thinking: how could making a first impression on a person have anything to do with budgeting?

Well, let’s say you want to invest in something. You know how much it costs, and you know how much you make. You stop spending some of your money every month and putting it aside. You’re responsible with this. You never miss a contribution and you never spend any of it on something else.

Before long, you’ll save up the amount you planned to, and you’ll succeed in your investment goal.

Why Budgets Fail

Now let’s contrast that with another way to start the same investment.

Imagine that instead of saving consistently every month like you planned, you only put money aside sporadically. The savings wouldn’t grow as quickly in this case. In this situation, it’s much harder to keep track of the amount that you’re supposed to have at any given time. 

Part of this is because you’re not putting in the same amount every month. Even if this is all you did wrong, you wouldn’t be able to meet your investment goal on time.

But inconsistently contributing to your savings account isn’t the only thing that could derail your investment. Dipping into your savings fund early and spending that money elsewhere can also knock you off track. An example of this is withdrawing from your 401(k) early to make a purchase. 

Not only are there penalties you need to consider before doing something like this, but you’re also diminishing the total amount of money in the account. You withdrew the money because you needed the money. But due to the costs, now you need even more money to put back in.

You can imagine how quickly something like this can quickly become an investment nightmare. Especially lately, most people that are forced to do this aren’t necessarily being irresponsible, either. The economy changes all the time. Certain financial decisions that seemed great years ago would be clearly avoided now. 

In order to be successful, you have to be flexible at times. So what do you do if you started your investment off on the wrong foot? The answer is different for every person that I mentor. Sometimes I help find ways to minimize expenses, but other people might need help increasing their income. Do you need help navigating your long-term financial goals? Schedule a 1-on1 with me today and start taking control of your financial future.