Coming Up Short Each Month

Dave gets a call from Larissa, who feels like she's sinking deeper into the quicksand each month.

QUESTION: Larissa in New York City says her family is not able to save any money. They make $111,000 and expect to make less next year. She is in a panic because they are now dipping into savings after they had their third child. Dave says math isn't the problem.

Dave's ANSWER: You guys are normal, and normal stinks. You make a ton of money and have nothing to show for it except worries. If I were going to hire you as a consultant for my organization and pay you a $50,000 fee to go into the houses of people in New York and straighten them up, you could do that because you can add and because it would not be you that you were trying to straighten up.

The problem with personal finance is in our mirror. The problem is that you are disorganized and spend too much, and you know this. You make too much money to be this broke, even living in the New York area.

Your first step is to be very intentional with your money because you are disgusted enough to try something new. That's good, because if you keep doing what you've been doing, you'll keep getting what you've been getting. You are going to do something radical called a written budget.

You and your husband turn off the television and put the kids to bed. Get all the bills down on the table and, for this month, at the first of the month, ask what you're going to have coming in. Then give every one of those dollars an assignment.

The first thing you'll do is buy food and keep the lights and the water on. Go right down the page writing out dollar amounts beside each category. When you get to the bottom of the page, you are going to have an a-ha moment and wonder where all this money went.

If you want to be drastic and not eat out, there has to be a reason to do that. The reason is that you and your husband together have sat down and looked at where the money is going and say that you are out of control. Then declare that you're not going out to eat this month because you are trying to hit a certain goal and clean up a certain debt.

You individually have a reason to do that. If you are freaked out and scared, that won't keep you motivated unless it takes you to a place. Scared is a good idea if you're playing in the traffic, because if you're going to get hit by a car, you need to get out of the road. That's where you are; you're going to get hit by a car.

Freaked out and scared is a good motivator, but using it without a plan is not going to make the sale to the family. The family is going to revolt. But if instead you get on a system and live like no one else so later you can live like no one else and sacrifice, you'll win.