Crisis Control For 2000 and Beyond by Larry Burkett

Author:Larry Burkett
Language: eng
Format: epub
Tags: ebook, book
Publisher: Thomas Nelson
Published: 2010-04-21T00:00:00+00:00

PART II

SEVEN KEYS TO EFFECTIVE INVESTING FOR THE NEW MILLENNIUM

8

Principle One:

Establish Short -Term Goals

John set up his first lemonade stand just after his birthday in 1972. He charged his customers 10 cents per cup and, after deducting the $1.79 he had spent on paper cups and lemonade mix, he realized a profit of $2.21. Not bad, he figured, for an afternoon’s work. He already knew how he would spend his fortune: He planned to give 10 percent to his Sunday school class, spend another $1.50 on a birthday present for his mother, and stash the rest in his piggy bank until he had enough to buy his own baseball glove.

Nearly two decades later, John earned his Ph.D. in economics from a prestigious East Coast university. As he contemplated this achievement, John’s thoughts returned to his first career. He realized he had learned more about things like budgeting, saving, and goal-setting through his lemonade stand than he had ever picked up in college or graduate school!

John’s experience is not at all uncommon. You can go from elementary school through one of the nation’s finest universities without ever learning basic skills, such as how to balance a checkbook, buy a home, or set financial goals.

Most Americans don’t live on a budget—at least not in the true sense of the word.

When we say that a new set of golf clubs isn’t “in our budget,” what we really mean is that we don’t have the cash to buy them. Budgeting, in our modern vocabulary, is a lot like dieting: both are last-resort measures we rely on when it’s time to tighten the belt a notch or two.

I know of one couple who used what they called “Budget Restriction” when they wanted to buy something they couldn’t afford. If the item was particularly expensive, they went into a mode called “Secret Budget Restriction.” And when they wanted to buy something really big, such as a house, they instituted “Double Secret Budget Restriction.” I have no idea what all these code words really meant; all I know is that each successive phase signaled another reduction in their spending.

For them, the concept of budgeting had very little to do with financial planning; instead, it amounted to a temporary cutback in living expenses. All too often decisions are made with a short-term view. For instance, a couple will decide to lease a car because they lack a down payment to finance one (and never have the cash to buy one). This plan works somewhat the first year, when the car is new and under warranty; but, when the tires wear out and other repairs are necessary, their so-called budget fails.

In reality, a budget is a short-term tool that you can use to achieve long-term goals. It is a spending plan to help you allocate money with an eye toward avoiding debt and saving for future needs. I’m not going to focus on the mechanics of budgeting in this book; if you want that information, please see my workbook entitled The Financial Planning Workbook (Moody Press, 1990).

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