The Butterfly Effect - How small money mistakes lead to long term financial disaster

This next post is something that relates directly to my last two posts.
“Out of sight out of mind” and “Introspection” This post is about the butterfly effect. The Butterfly Effect by definition is “Some small change in initial conditions can lead to large scale disaster and complete devastation in the future”.

All of us have things we do religiously, we are creatures of habit. After you do something so many times you stop thinking about it and you just do it automatically. Its like your brain goes directly to autopilot, kind of like auto pay it's out of sight and out of mind and can lead to financial disaster. All common sense functions have shut down auto pilot is now in full effect so buckle up its going to be a bumpy ride.

Since we are all creatures of habit we do things habitually. We do things without even thinking about it. All of us have our own daily routine. We wake up shower, shave, brush our teeth, then start our day. If you are always on the go then you probably grab a cup of coffee, or something off of the Starbucks menu that you need a scientific degree to order, like a Venti Double Foam Teavana Oprah Cinnamon Chai Tea Latte. You might even grab a pastry or a sandwich and off you go to start your day.

Later in the day you might order out for lunch, or go to a restaurant or fast food place for a quick bite to eat with some coworkers then back to work. After work you go home cook yourself some food sit down and relax. This cycle usually repeats its self at least 5 days a week, because you are working on auto pilot. You don't think about it you just do it, this is called a habit something you are used to doing.

As the weekend approaches you start to text and call all of your friends to see what they are doing, You start planning what you're going to do on your days off. Then Friday night hits and you are off to the restaurant to go meet your friends and have a nice dinner out. After that you are off to the club to go and let lose for a while. You'll go tear up the dance floor, have some drinks do some shots and take some pictures you will probably regret tomorrow when you see them posted on Facebook.

Then Saturday morning comes you will rush out the door go do all of your grocery shopping and run some errands. Then go back home and do laundry, clean the house and text your friends. If you're a girl then there's so much more is involved. You have to go get manicures, pedicures your hair done, then you have to go buy the perfect outfit to wear out tonight.. Then go shoe shopping, and possibly a purse to go with the new outfit.. After that a quick trip to MAC or Macy's to get makeup perfume then quickly go home take a shower get changed put on your makeup while texting your friends to finish planning the festivities for Saturday night. possibly a quick bite to eat then some more clubbing and partying.. That sounds about right..

Sunday is the day of rest and hangovers and extra sleep and the fake promise that if by some miracle someone can make the room stop spinning, and your unbelievably bad headache go away you'll never drink that much again.. you may even be praying to the porcelain gods to make it stop!!!! But you know as well as I do that come next Friday night you'll be doing it all again.. This is usually the point in time where people log into Facebook and say one of the following things..

OMG – WTF - I don't remember that - Is that even me – I swear I don't even remember this – Where was this taken – Who the hell is that girl – who the hell is that guy- Where are my clothes – why am I half naked – Why would you post that pic dude seriously..

Now that were done going through a typical week here's where the learning begins.. In the beginning of this post I mentioned the “Butterfly Effect” Some small change in initial conditions can lead to large scale disaster and complete devastation in the future. In this particular example its financial disaster. The majority of people only have two days off. Within those two days you have a laundry list of things to do so you rush through everything to get it done as fast as possible. So you can have some free time to be social and blow off some steam.

Since I have gone through a typical work week I want to take it a step further and show you something you are probably unaware of, here we go.

5 Days of Starbucks coffee with a buck tip $25.00

5 Days of eating out during work $50.00

Grocery shopping $65.00

Dinner out with friends $40.00

Drinks and shots at the club with tips $75.00

Just so you know I'm low balling a lot of these numbers, but let's total them up shall we.. My total came to $255.00 a week now let's multiply that number a few times.

$255.00 >< 52 weeks in a year = $13,260.00

$13,260.00 >< 10 years = $132,600.00

$132,600.00 >< 4 = $530,400.00 – In 40 years this is how much money is wasted a little over half a Million Dollars!!!

Somehow I think you can find a better use for that money..

If you just take a few extra minutes every day you can save yourself thousands of dollars every year. Get a reusable travel mug for your coffee and brew your coffee at home. Wake up a little bit earlier eat breakfast at home. Pack a lunch instead of eating out every day. Look for specials and coupons before you go food shopping, these simple daily disciplines will save you at least $700.00 to $1,000.00 per month.

Here's a great exercise start at the first of the month. Get a small wallet every time you make a purchase make certain you get a receipt. Then put that receipt in your new wallet. At the end of every day log all of your purchases into a notebook, or your phone, or on your computer where ever you want just make sure you do it every single day without fail !! When the month is over tally up your totals I am quite certain even you will be surprised by the amount of money that you are wasting every month.

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Introspection - A detailed look at your monthly expenses and debt

Since I just covered out of sight out of mind in my last blog post I wanted to follow that up with something called introspection.
Introspection is looking inward a self examination. One of the most costly things in life is a lack of paying attention to every little detail.

This is where introspection plays a huge role. What we are about to go over is your monthly expenses. The majority of people I talk to all have the same bad habits. They have everything set up with automatic bill pay. This is where bills are paid automatically after they are received. The money is instantly withdrawn from their bank accounts. Technology the ease of never having to write a check again.. This system is great for avoiding late fees and penalties on credit cards, and making sure your gas and electric bill are paid every month and what ever other bills you have set on automatic bill pay.

The down side is the majority of people do not even realize how much they're paying every month, they never even look at the bills to see if the amount is correct. The only thing people focus on is the fact that it was paid on time. This next exercise is something you should start doing if you are not doing it already. Starting in the beginning of the month. You should start keeping track of every single expense you have. Keep receipts for all of your purchases. If you have something on automatic bill pay print out a copy of that bill.

You want to see how every penny of your hard earned money is spent. I can say with a great amount of certainty that you will be amazed by how much money you are wasting each month.

Now what I want you to do now is get a pen and a piece of paper and write out each individual expense you have on a separate line.

Here are some examples

Mortgage

Rent
Home owners insurance
Renters insurance
Gas Bill
Electric Bill
Water Bill
Cable Bill
Internet Bill
House Phone Bill
Cell phone Bill
Lease on your car
Insurance on your car
Maintenance Bill for your car
Gas card Bills
All credit card Bills
All store credit cards as well
Pet supplies
Veterinarian Bills
School supplies
Doctors Bills
Medication Bills
Student loans
Bank loans
Food Bill
Clothing Bill
Kids expenses
Bus Pass
Bus Tickets
Subway cards
Phone cards
Make a detailed list of everything you spend money on !!!!!

Save every single receipt and log your expenses in a notebook every single night as soon as you get home No Excuses. Also there's No Excuse for losing receipts, buy a small wallet and put them in their as soon as your are done with each transaction. Also check each receipt for accuracy mistakes happen.. At the end of each week you will be able to see how your money is being spent. You will be able to get an exact account of how much money you are spending monthly at the end of each month.

This exercise will also show you how much debt you have. If you owe money on credit cards, or store cards like Macy's Or Sears pay them off immediately. If you are constantly making the minimal payment on credit cards or store cards all you are doing is paying off the interest.. The bulk amount of the money you still owe is still there.. Next month that bill will look about the same as it did last month if you're only paying the minimal amount.. So focus on paying off all the money you owe, even if its just one card at a time..

The most important thing is that you get it done.

Keeping receipts and logging them into a notebook should be something you are doing daily. This is something that should become a daily discipline. You do it without thinking about it, it's an automatic reaction the second you make a purchase ask for a receipt then check it for accuracy then immediately put it away. As soon as you get home open up your notebook and log it in..

The sneaker company NIKE said it best “ JUST DO IT ”

Once this system is implemented into your daily routine you won't think twice about doing it when you start your own business. Create good habits now and they will serve you well in the future. 

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