In Ch. 1 of Personal Finance, Suze discusses living honestly about money. What does it mean to you to live an honest financial life? Provide an example of someone who has not lived an honest financial life. Why was it dishonest? Provide an example of someone who has lived an honest financial life. What made it honest? To me living an honest financial life is someone who does know where their money goes. A person who has a clear picture of what their finances are. It’s not a guessing game. I would say a person who is living a dishonest financial life is someone who spends money before paying bills, and then doesn’t take the time to balance their account leading to fees. It is dishonest because they have no idea about their financial picture; they spend money before thinking about where their money needs to go.
Someone who is living an honest financial life understands where their money is, where it needs to go. They have a budget set in place to make sure all possible expenses are covered. I think it makes it honest because you have to have complete clarity and you have to be honest with yourself. “No I can’t buy those new shoes. I need topay he vet ill this month.”
I actually create a profit/loss each year. The profit/loss statement is my income (revenue) less my expenses = profit/loss. The profit would be what I could afford to save or spend on a extra-ordinary item I have been wanting. The loss would either have to be funded from savings or…..find some way to cut expenses. Have you ever tried to create a profit/loss statement for your household? What benefits do you see by using such a tool?
I run reports in Quicken that state my income for the year and expenses. I’m fascinated by how much money I spend on fast food, or gas. I have never thought of subtracting them and turning the numbers into a profit or loss figure. I’ll have to try that at the end of the year to see what I could possibly spend on an extra-ordinary item.
Suze calls money a