As you track what you spend, you will notice that it falls into two basic categories--items you need to maintain your normal lifestyle and items you don't really need (but just want). The necessities include your mortgage, car payments on a reasonable vehicle, utilities, taxes, groceries, and the like. These are called nondiscretionary expenses. The wants include trips to retail stores, eating out, and a million text messages a month. These are discretionary expenses. On top of this, if you are "cash flow positive," you have extra money left at the end of the month. Later, we will be talking about saving for your retirement. You may already have a plan for this. However, any additional money you want to save for retirement will need to come from your positive cash flow or discretionary spending. That's why it's so important to know your expenses. What if you're cash flow negative? Don't panic. We'll talk about that tomorrow.
Be prosperous!
Peggy
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