The best way to discover medicines that will cure an illness is to approach the problem mathematically. Scientists take all known parts of the disease and quantify it into numbers and analyze what would happen if one change were made. Math allows testing on paper first, then for real-world testing, adjusting for what is learned in reality. Consider the scientists who have applied mathematics to all the life-saving vaccines we now have, or in what they are doing to combat heart disease and diabetes.
And what about space travel… consider the scientists and mathematicians who planned the entire trip in a rocket to the moon and back to earth safely in 1969. A new movie just out called “The Hidden Figures” explains how this trip was possible through the brains, talent, and skill of engineers and mathematicians plotting everything in numbers first that would be needed to make the trip safely in reality. Once they had tested it mathematically on paper, NASA felt it safe to send astronauts into space and return them through a landing in the ocean within a radius of less then 10 miles of the projected landing site. The numbers were what allowed them to know where ships would need to be to pick up the astronauts. The numbers were what allowed men to land on the moon and come home again.
The same trust in numbers can be applied to your finances… when it comes to your income and expenses math will never let you down in terms of telling you the truth about whether the amount of money you have coming in will cover the amount of money you spend. Numbers are unemotional. The numbers give us the hard, cold facts about the way we have spent money but that’s where their usefulness ends. Once we see the numbers on paper, we have a choice about what to do with them. They can’t just remain a number that has no emotional baring on what happens to us going forward. We must make a choice about what those numbers mean to us and what we plan to do differently in the future to change those numbers going forward, especially if we are very unsatisfied with what they show to us about our spending and debt.
At Money Mastery we teach that money/spending is emotional, not mathematical. If spending were simply a mathematical problem (i.e. you bring in X amount of money, you spend that amount of money and no more) then overspending would never be a problem. But since spending has so many more factors tied to it than just how much you bring in and how much you expend out, you must have a system for managing it that goes beyond the numbers. However, it is very important to remember that there is no way to create this system of emotional management without first turning to the numbers for a baseline. They do not lie and you must face them if you want to make good decisions going forward about how your money will be used.
Here’s are some of the ways money is emotional:
- Many people put off adding up income and expenses just so they don’t have to face the awful truth about how much they overspend. This is called emotional avoidance and we apply it so many places in our lives, including on our finances.
- Some people don’t want to face how much they have spent in a particular category, horrified, for example, about finding out through the math that they value fast food more than they value getting out of debt or saving for emergencies. The emotion many people tie to this realization is regret over irresponsibility.
- Some people like to blame others for their financial trouble. This is called emotional immaturity. Instead of facing the fact that they have no idea what is happening to their money they blame an employer for not paying them enough, a spouse who spends too much money, or bad health or misfortunes that they couldn’t possibly foreseen on their money problems.
If you are playing any of these emotional games, now is the time to get off this emotional roller coaster and get back to the numbers that will take the emotionality out of money and spending and give you a system you need to stay on top of emotional events that are bound to happen to you.
To do this, I recommend the following:
- Create a 12-month history of how you have spent money.
- Put all that spending into categories and total up how much you have spent in each category.
- Review what you don’t like about the way you have spent in the past.
- Create a spending plan with specific categories that will allow you to spend more in some areas than others based on what you value most but will keep you from going over.
- Track your spending (by categories) for 30 days according to that plan, then compare how you spent with the way you planned to spend. Make adjustments as necessary and then try to stick to spending within your plan as closely as you can for the next 30 days.
- Create a debt plan so you can see just how much you owe, how long it will take you to pay it off if you don’t apply debt elimination techniques now, and begin tackling the first debt on your list.
- Lastly, calculate how much money you will have available to you at about age 68 and prove to yourself whether you will have enough money to take care of yourself in old age or not. NASA could never have gotten the astronauts to the moon and back if they had not calculated how much rocket fuel was needed to do so. This was an unemotional exercise: Figure out how many miles to the moon and back and how much fuel would be consumed by the craft and determine the amount needed. The same applies to you when it comes to retirement: Determine what retirement means to you, how far away you are from reaching it, and how much money you will be consuming now and into retirement. This will tell you how much you need to have to start building a future that will be fun and exciting rather than scary and debilitating.
You have an opportunity to check your numbers quite easily with the Money Mastery online software. Take the emotions out of your daily life by easily creating spending, debt, and savings/retirement plans using these tools. You are only three months away from dramatically changing your financial life for the better. Rather than being scared of the numbers, use them to help you create a base from where you can then fix problems, alter your course, and get to your destination safely and on time.