Small leaks can sink your boat.

“A small leak can sink a great ship.”

“Creditors have better memories than debtors.”

“By failing to prepare, you are preparing to fail.”

“Rather go to bed with out dinner than to rise in debt.”

     These are some of my favorite quotes from Benjamin Franklin. What I got out of these quotes was a reminder about the importance of budgeting your money. That “great ship” he is referring to could be your financial well being and the small leak could be anything that is draining money out of your household and taking away from your quality of life. If you are not following a written budget and are just spending your money any way you want there is a very good chance that you are losing much more money than you are aware of.  

     Everyone that has any kind of income should have a written budget. That means everyone from a CEO to the paperboy. A budget will become more than just a guide to tell you where you money should be going this week. It can be a very powerful analytical tool. It will help you make informed decisions. It does that by helping you identify waste and opportunities.  

     Here is an example of how a budget will help point out areas of opportunity. While Linda was researching her expenses in preparation to write her budget she discovered that she was spending $30.00 a week on her lunches. That was 5.5% of the $550.00 she brought home every week. Linda also noticed that she was only spending $10.00 a week on things for the upkeep of the inside of her home. That was 1.8% of her weekly pay. She now realized she was spending three times the amount of money on her lunches than she was on the upkeep of her home. She also knew that if she had more money to spend on home upkeep she could reduce costs. For a minimal cost she could have her faucet fixed as well as weatherize her doors and windows. So based on this information she would spend less on lunches for now, more on home upkeep, and have more money left over due to reduced energy costs. That extra money could be used to again buy lunches at work if she so chose.   

     Sometimes you might think that money took a magic class. It is really good at the disappearing act! What happens is that when it is put in a pocket or purse it seems to vaporize into the air. Many people will start out with a thick wad of bills and end up with nothing and have no idea where it all went. I saw this often when I worked in a foundry with a bunch of 20 year olds. We were paid weekly and they would go to the grocery store on our lunch break and cash their checks. That way they had all the money in their pocket at the end of their shift and could drive directly to whatever source of entertainment they had scheduled for the weekend. You can already guess the stories I heard on Monday. At Monday’s lunch break we would get together and they would complain that all the money had “vanished”. Worse yet, the bills that were due didn’t have the courtesy to vanish as well! They had no plan or budget for their money and the predictable outcome happened.  

     Dollar bills are like little children. They need constant attention so they don’t run away! I remember dropping my daughter off at daycare once when she was about 1 year old. The teachers had all the 1 year olds in a room that had a gate so the kids couldn’t escape. As you can imagine, there was always tons of activity in the room because these kids were just learning to move around and wanted to exercise their new found mobility. I opened the gate to get into the room, and as I walked in one of the children quickly crawled right passed my feet and escaped from the room! I tried to catch him, but he was gone in a flash! Trying to watch your money without a budget is like watching those 1 year olds without a gate! The second you leave the gate open or stop following the budget someone or something is going to get away from you!  

     Ever see those machines at the supermarket that let you pour all your spare change into it so that you can get dollars in return? I have seen some people come in with giant jugs of spare change. One guy I remember may have wished he came in at night time when there was less of a crowd because he seemed embarrassed by the attention he and his wife were attracting with the constant clinging and clanging of coins. As I waited in line to make my purchase I wondered how long it took him to collect that much spare change. Regardless of the amount of time or how he did it I am assuming that he had acquired a mountain of money with just a little bit of change at a time. Now think about that result in reverse. What if you were losing a few cents at a time? Maybe you paid a little too much for an item, left a light bulb on while you were out, let the faucet continue to drip, or you bounced a check or two? All that extra change you paid because of those things may have cost you that gallon jug of money! 

     Now is the time to patch up those small leaks. The best way to identify them is to write a budget. When you keep an accurate account of everything you are spending money on you may be surprised to find out where your money has been disappearing to.  Once you have identified those leaks get to work quickly with patching them up.  

     Ben Franklin said it best – “a small leak will sink a great ship.” It is important that we inspect our ship (our finances) and look for those small leaks regularly via our budgets. If you budgeted $50.00 for an expense but you spent $70.00 there is a leak somewhere! The thing about small leaks that go unattended is that they turn into big leaks! When it’s your money leaking you are being robbed of your quality of life. Take the time now to write a budget and then identify and fix those leaks before you are sunk! 

About BowmansMoneyCollege.com

     Bowman’s Money College offers consulting and educational advice to individuals and families on personal financial matters such as starting a small business, writing and following a household budget, and rebuilding credit. For further information visit BowmansMoneyCollege.com or email mike@bowmansmoneycollege.com.