I don’t know how started the myth that ostriches stick their heads in the ground when they sense danger.
I’ve been to an ostrich farm before and not once did I see an ostrich with its head planted in the ground.
I have, however, seen many Realtors use the Ostrich Money Strategy.
The Ostrich Money Strategy is one of avoidance.
If I avoid looking at my money, it will get better.
If I avoid opening my credit card bill, things will get better.
Someday magically, the maxed-out credit card will suddenly be paid off.
Money problems will continue to be money problems until they are appropriately dealt with.
Here are my steps to vanquish the Ostrich Money Strategy from your life.
Once you kick the ostrich to the curb, you’ll be well on your way to getting a handle on your money.
Here are my steps to obliterate the Ostrich Money Strategy.
Step 1 Have a debt pity party
Most people have some form of debt.
Go ahead and have a pity party about your debt right now.
Take the time now to eviscerate yourself for being foolish with your money.
Rake yourself through the coals.
You’ve been an unwise steward with your money.
Get it all out.
Realize this. Everyone is foolish with money.
Everyone gets behind the eight ball with money.
Everyone gets into debt.
Many people max out their credit cards.
There now you’ve had your pity party.
The past is the past.
Don’t let the lousy money decisions you’ve made before today weigh you down anymore.
You are now going to take action to explode debt from your life.
Step 2 Take inventory of all your debts.
Make a list of all your debts.
Don’t hide any of them.
The only way to get rid of them is to face them head-on.
Your list should include the following items:
- Day of the month the payment is made.
- Lender or credit card name.
- Total outstanding balance.
- Monthly minimum payment amount.
Step 3 Determine Your Monthly Personal Spending
Now you are going to determine what your monthly living expenses are.
Here are the steps I recommend you take.
For this action, you’ll need to grab the last two months bank and credit card statements.
I recommend you list everything you spend money on for the last two months that way you get a better understanding of how you are spending your money.
Most people, including myself, spend money each month without thinking.
If you put a little thought behind your spending, you are more likely to be wiser with your money.
Next, you will either grab a paper and pen, or you will open up a spreadsheet on a computer.
- List all of the expenses with the following information for each expense:
- Day of the month the payment is made
- Business name you are buying from
- Type of expense
- Amount of expense
- Now that you have your list, write the letter R next to each expense that is a recurring expense such as the following:
- Rent or mortgage payment
- Car expenses
- Dining out
- Now review your list and draw a line through any item you could do without. These are items that you will avoid spending money on for the next four weeks.
- Now make a list with all the recurring expenses.
- Total up all the recurring expenses. This is your new monthly spending amount.
For example, let’s say you add up your recurring expense, and your total monthly recurring expenses is $4,000.
$4,000 is your new monthly spending amount.
Step 4 Determine your monthly take-home pay.
First, you’ll have to write down how many times a month you get paid.
- If you get paid weekly, then you will get paid four times a month
- If you get paid every other week, you get paid twice a month.
- If you get paid on the 15th and last day of the month you get paid twice a week.
Now, look at the net amount that gets deposited into your bank account. This is your take-home pay.
If you get paid $1,200 deposited to your bank account after taxes each week, your monthly take-home pay is $4,800
Add debt payments to monthly spending amount.
You have an obligation to make the monthly minimum payment on your debts.
In our example, we are going to assume you have a total of $400 of debt payments.
Once we add debt payments to your monthly spending amount, you know have a total monthly cash need of $4,400 per month.
Step 5 Open up a savings account
The savings account will protect you from spending more money than your monthly spending amount.
We are going to play out of sight out of mind with your money.
The only money that you are allowed to spend is the money that is in your checking account.
Assuming you get paid $1,200 per week, you only need $1,000 each week to cover your monthly spending amount.
As soon as you get paid, you need to move $100 from your checking account to your savings account.
This way, you will be limiting the amount of money that you have access to in your checking account.
The other side benefit of moving the money is you are starting to build up cash reserves.
Your cash reserves will come in handy when an emergency arises like an unexpected car repair.
Your first goal should be to have $1,000 in your savings account.
For the next month, you are going to practice the discipline of not spending more money than the $4,400 you have in your checking account.
At the end of the month, you will need to record how much money you actually spent.
Compare the actual spent with the target spending amount. In our example, this was $4,400.