Moorman and Company

Program, Discipline, Patience, Time. These are the four cornerstones of financial success. With these four prime assets, properly utilized, anyone can acquire an estate of sizeable proportions. However, if you eliminate any one of the four, you cannot succeed. You must have a program, and discipline, and patience, and time. No combination of three will do the job. All four must work together.

Most of us imagine acquiring a large net worth properly spread out among cash, residence, real estate, securities, equities and various other possessions. And, being imaginative, most of us even round out the figures with lots of attractive zeros.

In this manner we while away the years, rounding out the notion that next week, next month, next year we will pull those dreams down out of the clouds and put them to work. But we don't. Then, when most of a lifetime has slipped away, we begin to contemplate the confounding uncertainty of our "declining years" (as a client of mine once put it). And we wonder what happened to all that wealth, with all those nice, round zeros, that we were going to start accumulating — tomorrow.

So how do we go about organizing our lives around a system of accumulating money in such a way as to link ends with means?

First of all, we all live in two time zones. A part of us lives today for today, and a part of us lives today for tomorrow. We budget today between the needs of today and the needs of tomorrow. That is, we should so budget.

Let's start with today's needs. To arrive at a budget of current living expenses, do not take just one month's bills and expenses. Review the past several months' of actual expenses, itemize each expenditure and place it in an appropriate category. Possible categories include: Food, Housing, Clothing, Utilities, Transportation, Entertainment, Taxes and Medical Expenses. Additionally, anticipate those things for which you do not already have a history. These include vacations, Christmas gifts and anniversaries. Itemize them all into your budget.

As far as possible, use checks to pay for all your personal expenses. The very process of tallying those expenses will be an education. Additionally, your check register will provide detailed information for the budget. After a month or two, your spending patterns will appear, and you will have a better understanding of where you can properly economize. Thus you can quickly plug any spending leaks, make intelligent provisions for anything overlooked and establish a workable living style that will take care of today's needs and provide for the needs of tomorrow.

Now, let's talk about tomorrow's needs. As a rule of thumb, you should be able to save 10% of your earnings. Let's say you are 30 years old and earn $22,500 annually. Suppose you begin saving $2,250 per year in an account earning 10% interest. At age 65, your account balance, expressed in today's dollars, will be $670,785. Further, if the above investment was made into an IRA, both the deposits and their earnings would be income tax deferred.

On that basis, on the first of each month, write a check to your savings account. Under no circumstances are you to withdraw that money except for specific investment purposes. If you are constantly tempted to "dip into" your savings for current expenses, look to your budget for a solution, not to your savings account. Reorganize the component parts of the budget; do not increase the budget. Today must take care of today's needs. You cannot borrow from tomorrow for today's needs.

In a pinch, you must decide what nonessentials you are willing to forego. Since the future is an essential, you cannot cut it down or cut it out. But do not rush your decision; more money is lost by confusing nonessentials with essentials than vice versa. Take twenty-four hours, sleep on it, then decide. Go without something you thought was a vital necessity for three weeks, then see if, at the end of that time, it remains an essential. Obviously if it had been an essential, you could not have gotten through those three weeks without it.

Finally, let me reassure you on one special point. The first three months of living on a fixed budget are the hardest. After all, you are likely to be overcoming habits of a lifetime. But once you pass the habit-craving stage where "one more movie" or "one more dinner out" seem so irresistible, you will find how easy it is to live within your budget. Actually, it will come quite naturally once your budget is intelligently prepared and faithfully followed. Before you know it, your budget will fit as comfortably as a pair of old slippers you put on in the evening to rest and enjoy life —life today, and life tomorrow with all its exciting prospects.