Budgeting vs Barreling - The Legacy of Annie Edson Taylor

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BUDGETING VS BARRELING – Lessons Learned From The Legacy of Annie Edson Taylor

Just about everybody I meet tells me they could use more money in their life, but mention the “B” word and most people run for the hills. If you think living on a budget is no fun, consider for a moment the alternatives.

Would You Rather Go Over Niagara Falls in a Barrel or Live On a Budget?

In the summer of 1901, Annie Taylor hatched a plot to solve all her financial troubles: she would be the first person to go over Niagara Falls in a barrel. Her thinking wasn’t as irrational as it sounds. As a 63 year-old school teacher and a widow who was used to a certain standard of living, she worried about running out of money. She believed this stunt would solve all her problems. All she had to do was pull it off.

Annie invested in her idea: she hired a promoter and an attorney, and paid a cooper to customize a barrel with padding and a leather harness.  Three months later on her birthday, Annie packed herself into the barrel, was towed out by a small boat and cut loose. She emerged at the bottom of the falls after twenty minutes, bruised but victorious, and ready to greet the spectators who had gathered to watch.

Clearly, Annie’s story isn’t about someone who lacked bravery or planning skills, but rather it’s a cautionary tale about misguided energy. Annie’s stunt did garner some media attention, and obviously she is still remembered to this day, but did Annie meet her financial goals? Sadly, no. It is said her manager embezzled the money she earned for her stunt, and Annie died in poverty at the age of 83.

Micro vs. Macro Economics

As a financial professional, I meet a lot of people like Annie who would rather do just about anything than face the numbers on the page. We have a tendency to keep our head down and focus on the day-to-day, believing that if we work hard, things will just work out. This kind of hope-based planning leads to money decisions that are based on short-term goals and immediate gratification. In the world of financial planning, we call this microeconomics. It might bring about brief bursts of success, but in the long run, you’ll end up like Annie with nothing but a few flyers and a fancy barrel.

Macroeconomics takes a step back and looks at the big picture. (Microeconomics on the other hand only takes into account what is happening now.) Financial decisions are based on the long-term, and that leads to peace of mind. The foundation of macroeconomics is what I call, knowing your numbers.

I’m not saying that living on a budget and saving regularly are easy, but the truth is, you’re going to spend the energy one way or another. Will you spend it worried and hoping, designing your own version of a customized barrel? Or will you face the numbers and increase your chances of having a favorable outcome?

Building the Budget

You won’t be able to escape that feeling of not having enough until you take charge of your financial situation and draft a budget. Too many times we rely on the advice and numbers supplied to us by other people, some of them professionals, without first doing the work to create our own numbers. I see this when people finance a house they can’t really afford, or take on more risk during retirement than they need.

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Budgeting doesn’t mean you are living on the cheap, rather it means you are fattening up your future. Take a look at your current expenses and divide them into two categories:

  1. Those that are set in stone and cannot be changed.
  1. Those that can be changed by you.

See if you can identify areas where you might save an extra five, 10 or even 50 dollars a week, then start funneling that money into a savings account. If you are retired, identifying these two types of expenses should be your first step before thinking about the kinds of investments you need to supply an income stream.

Knowing your numbers gives you power. You’ll be able to say with confidence to the real estate agent, the car dealer, or even your broker, “Nope. Sorry. That won’t help me.” It will be easier to make these decisions because you’ll have a clear long-term goal in mind.

Moral Of  The Story

Had the heroine of Niagara Falls taken charge of her own numbers, maybe she would have been able to better invest the money she had, or keep more of what she earned during her stunt of bravery. Regardless, we can take from her the lesson that it’s better to face the numbers than crawl into a dark barrel alone and suffer the consequences.

Are you ready to join the RichLife community today and take control over your life and money? Pick up the new second edition of “The RichLife, 10 Investments for True Wealth” and discover the RichLife that’s waiting for you!

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