Authored By david

I never set out to teach my kid about Santa Claus.

There was never a day that I looked into his innocent and receptive eyes and explained to him that there was a magical dude from the North Pole who would bring him stuff he wants, for free.

We didn’t engage in a dialogue about how his behavior, as my child, has some impact on the quantity and quality of his gifts, subject to some boundary imposed by a modern and middle-class societal pressure.

No, I didn’t teach my child about Santa Claus, but he knows all about this phenomenon nonetheless. A full understanding of the Christmas gift economy is apparently a part of the Child 2.0 software updates, along with an encyclopedic knowledge of the “Star Wars” universe and the desire to climb up the slippery part of playground slides. I digress.

Why did I not set out to load my boy up with Santa lore? Because I really want(ed) to discourage in him the belief that stuff is free, that he is somehow entitled to loads of presents, and to raise him up to believe the words of the prophets Jagger and Richards: “You can’t always get what you want.”

As it turns out, there are plenty of grown-up children (AKA adults) in the world who struggle with some of these same concepts and have difficulty managing their personal finances. This week’s column seeks to outline some basic concepts for being a financially responsible person and was inspired in part by this comment from Redditor dejavux67: “Might sound dumb, but how about an article about living within your means?”

Take a financial selfie.

At this point, most of us have a pretty good sense of how to take a shareable selfie. Get cleaned up, put on some nice clothes, pick a spot with decent light, and snap a pic from above. Duck face is optional. A simple and productive first step to getting a grip on personal finances is to take a financial selfie.

-Know your income. For folks on a salary, this is pretty straightforward: You know how much is coming in every month as take-home pay. For hourly workers or those paid a variable amount on sales, the idea is to get a sense of a stable average and then discount that number a bit to allow for the variability.

-Organize expenses into categories. One group should be fixed-cost items such as rent, insurance and subscriptions (gym, cable, mobile phone plans, etc.). Another group would hold variable but regularly recurring expenses such as food purchases and consumables (paper towels, dish soap and shampoo).

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-Know what you owe and what you own. If there is a car payment, make note of the total owed and at what interest rate. The same goes for credit cards, student loans and any other debt.

Drop the entitlement.

Just like with my son and Santa Claus, many of us hold on to this idea that there are things that we are supposed to have, and we further confuse wants with needs. My kid does not need several $100 Lego sets; he needs a safe place to sleep, healthy food to eat and constant reminders that his feelings of physical invulnerability are an evolutionary trick. This basic model extends to the rest of us. A key to living within one’s means is the ability to be clearheaded in separating wants and needs. In my work, I have heard many people rationalize how they need a new iPhone on a major carrier with a huge data plan; others have to have a $30,000 car; still others feel the burden of necessity to take their kids to Disney at least once per year. It is on this issue that I see most budgets and financial plans break down; so many of us have a blind spot to our own feelings of entitlement and are so very good at rationalizing things that we want (but do not need) into the budget.

Pick and choose.

This is where you combine the selfie snapshot of your current condition with that list of needs and wants, and choose what stays, what goes and whether there is room to add to the mix. If the fixed costs and recurring variable costs add up to more than, say, 90 percent of your take-home pay, something has to change. On the income side, ask for a raise, look for a new job or take on side work. On the expense side, start chopping wants from the end of the list. Maybe that means dropping the fancy mobile phone plan and moving to the Walmart plan; maybe having a place of your own is a want, but having a roommate for a few more years is a need. The tough love reality is that structural issues with a budget, situations where you consistently spend more than you make, are not sustainable and do not magically correct themselves. Taking on consumer debt like credit cards to finance normal living expenses is a slippery slope into insolvency.

Rinse and repeat.

Situations evolve, surprise expenses pop up, and better job opportunities come along. A healthy approach to budgeting and living within one’s means will recognize the need to refresh periodically and go back through all the steps: selfie, needs versus wants, pick and choose what stays.

David Wattenbarger plays trivia at bars and Boggle at home when he is not out exploring Chattanooga with his wife and son. He is president of DRW Financial and can be reached at [email protected], on Facebook or on Twitter. This column is not intended as formal financial advice. Consult a financial or tax professional before taking action. The opinions expressed in this column belong solely to the author, not Nooga.com or its employees.