By: Pamela J. Sams
Who doesn’t enjoy getting lost in a good fantasy? It’s a fun and relaxing mental vacation, and it can even serve as a motivator to go after desired goals. The problem occurs when we confuse fantasy for reality and end up either accidentally or deliberately sabotaging their lives. The financial ruin that can result from living in a fantasy world is particularly difficult to come back from, especially when the underlying cause is not acknowledged or even recognized. Women who take stock of whether they are living in reality vs. fantasy when it comes to financial matters have taken the first step on a path toward prosperity.
So, how can you tell whether your financial expectations are realistic? Here are some key points to consider when determining whether you’re walking the line between living in reality vs. fantasy.
Read Your Financial Barometer
People who have been accustomed to a comfortable lifestyle may find it difficult to adjust to a more frugal existence when it is needed. Expenses that were viewed as trivial before suddenly have a greater impact on the budget. Getting a weekly mani-pedi, picking up that adorable designer dress on a whim, or dashing off for a weekend getaway, buying that new car, lawn mower, or enjoying a regular poker night with the guys might have been routine and not worth consulting the checkbook. Such actions under a tightened budget, however, could empty the piggy bank in a hurry.
On the flip side, even those who have lived frugally all along may not be making wise financial decisions. Choices such as buying the smaller package of coffee because its price is lower than the larger package doesn’t make sense if buying the larger package is cheaper per ounce. It’s just as easy to be fooled by the fantasy of savings if you don’t do your homework and just go on what a “Sale!” sign declares.
Keeping Up Appearances
The mani-pedi, designer dresses or guys night out, denote one of the major contributors to living in fantasy. Commercials on TV and online, print ads in magazines and billboards, and even competitiveness among friends and co-workers all encourage people to feel they’re not beautiful or stylish enough unless they purchase the latest designer item. But of course, believing that it’s imperative to “keep up” with others is all a ruse and the biggest fantasy of all – one that far too many fall for and suffer from as a result.
Claim Responsibility and Accountability
A major hurdle to overcome from the start is the practice of budgeting. Some people never had to concern themselves with limiting their expenses. Others never bothered consulting budgets since they weren’t the breadwinners or because the other spouse managed the finances of the household, and they therefore never felt it necessary to track all those nickels and dimes. It’s funny that some women who would never dream of dieting without tracking every single calorie have no qualms spending without tracking their expenditures; and some men can give you their work out reps in a few second, couldn’t tell you how much they spent on simple things. And women of modest means often distribute their limited funds in ways that they think (fantasize) will meet their needs by paying some debts and ignoring others, but they are only prolonging their financial struggle.
Trim expenses to a comfortable, manageable level. Suggested approximate levels to aim for include the following:
- 5-10% for savings: Set it aside, and don’t touch it. At some point, you will need it.
- 30-35% for housing, including utilities and furniture (in the past, 25% was recommended and is still an ideal to shoot for – but take care to be realistic about your expectations)
- 20% on food, including dining out (Tip: cook delicious, healthy meals at home more often)
- 20% on transportation
- 5% each on medical, clothing, debt, and entertainment costs. And if you’re looking for a place to cut more, remember that reducing entertainment costs doesn’t have to mean reducing entertainment itself. Just find less expensive ways to amuse yourself.
Getting your budget in balance not only improves your financial health, but also your physical health and beauty. Think about it: harnessing your finances and keeping them in check will translate to fewer sleepless nights tossing and turning with the fears that come with financial worries. Getting a realistic handle on your finances might be just as beneficial as a week at the spa!
The reality is, even the wealthiest men and women should have their fingers on the pulse of their financial health at all times. The way to make your money work effectively for you is to know where your money comes from, how much it is, where it is, where it’s going, and what it’s doing for you. Living in financial reality means you rule your finances, not the other way around.