Try this, sit down and list where every dollar of your last paycheck went. Try to account for every dollar. If you are like most people this is extremely difficult. Keep this in mind, if you can't explain how you handled your money then you simply don't know how to handle your money. This statement may sound harsh, but it is true.

Everyone has heard about the Enron scandal. Although there are some differences. The Enron accounting practices are only billion dollar versions of the way millions of households operate every week of the year. In both cases the trail of the finances became so cluttered that the path you are walking on can't be seen anymore. The great majority of today's household finances is used for reactionary budgeting rather than discretionary budgeting. This is the fork in the road where we crash and burn.

Reactionary budgeting involves spending that creates an environment where you spend most of your time and money trying to keep pace with the bills each week. Those on this path do a lot of living paycheck to paycheck.

Discretionary budgeting is carefully planning where your money will be spent and staying on a path the will lead to ever increasing financial stability. Those on this path will often find wealth lying at the end of it.

An example of this principle would be to imagine two football teams playing each other. If one of the teams had a coach with 20 years of experience and knowledge, he would make a game plan according to his discretion based on this knowledge. On the other side of the field the coach has chose to make decisions by reacting to the game as it happens. Obviously the coach who came in with a game plan will have a major advantage.