Managing Your Money

Personal Money Management Program is based on the 7 Principles in The Richest Man in Babylon by George S. Clason.1. A Part of All You Earn Belongs to You

⇒ Pay Yourself First

If you are like I was, I thought that ALL I earned belonged to me. When I started calculating how much went out, I realized I was a sieve – money ran through me rather than to me. So how can you turn your sieve into a bowl – and how can you fill that bowl to overflowing?

Start by putting aside FOR YOU a tenth of what you earn. I work with business owners and as I teach them about their finances, I insist that they have a business savings account. Every time a customer pays an invoice, they are to put 10% of that payment into the savings account.

The same for you. Every time you get paid, put 10% aside into your savings account. And before you know it, your sieve becomes a bowl – and you will need a bigger bowl, and so on and so on.

2. Control Your Expenses

⇒ Know the Difference Between Needs and Wants The National Endowment for Financial Education defines these terms as:
⇒ Needs – the very basic things we must have to survive

⇒ Wants – the things that make life more interesting and fun, but we could live without if we had to

It’s hard to determine a need from a want if you don’t know what goals you have for your money. Is buying a family home or a reliable car or a college education a money goal? So with your paycheck you must keep your goals in mind and still handle your day-to-day needs – phone, rent, transportation.

Let’s look a little deeper. Electricity is a need, but you want a specific temperature. Do the Home Energy Audit at to help you better determine how much of your bill is a need versus a want.

You need a phone, but do you need a cell phone. Yes? Then do you need texting or access to the internet or is that a want? You need transportation, but do you need a new BMW or is that a want?

Each of us will answer these questions differently depending on where we are in life, how much income we have, and how much debt we need to pay down. It is extremely important for us to honestly discriminate between needs and wants. Michelle Singletary, author of the Washington Post column The Color of Money says we must decide what we value the most and spend our energy and money to achieve those goals

3. Multiply Your Money

⇒ Put Your Money to Work

Now that your bowl is filling up, what do you do next? Find a way to increase your money. You started with the most simple way; you started building your savings account. Nowadays the interest is very small, so how can your money work harder for you? Money Market Accounts, Certificates of Deposit? You want it to work even harder? Mutual Funds, Bonds, Stocks, etc.

But beware. It’s all about making choices – the right choices. Communication is not just speaking and listening; it is understanding. Understand how your money grows.

4. Guard What You Have

⇒ Secure Your Principal Through Wise Professionals

You need to feel comfortable that your money is working for you in the best way possible for you. The best way to do this is to find the right professional, if you are not one yourself, to guide you in keeping your money working. The financial professional’s job is to constantly encourage your money to grow new money.

Your job is to make sure you understand how your money is growing. One of the reasons many of us have lost so much of our funds is because we abdicated control over our money. Our job is to work with the professionals, not dump our financial “stuff” on them and expect them to be miracle workers. Not fair – to them or to us.Use the expertise of an honest and reliable professional.

Simple makes a lot of sense, and my communication style is very simple. If I don’t understand what is being said, I say so. If I don’t understand a document, I don’t sign it. If I don’t understand an investment strategy, I don’t invest in it. So I ask you to do what I ask my business owners to do – turn into a 2-year-old and ask “why” until you get an answer you can understand and feel comfortable with. Then you have the power to say “yes” or “no.”
You can’t control your money if you don’t understand it.

5. Invest in Your Home

⇒ Strive to Own Your Own Home

In this time of massive foreclosures, people are making money. How? Because they took care of the first 3 principals and are using this down real estate to fulfill the 4th. Owning your own home is one of those money goals you may have. Understand that unless you pay cash for your house, you are building a debt – a big one. Is it a necessary one? For most of us – yes. We have to pay to live someplace, so why not build equity at the same time?

6. The Future is Now

⇒ Prepare for Your Retirement and Your Family’s Needs After You are Gone

Yes, you need a financial professional – really! There will come a time, which seems farther and farther out, when you will want to retire. But for some reason you will still want to live comfortably. After all, you have worked hard all your life. Aren’t you entitled to a comfortable retirement? No matter what age you are, you should have a plan for how you are going to reach that comfortable retirement goal.

Things to think about …

⇒ Insurance Coverage – home, auto, health, life, disability, long-term care, etc.
⇒ Will or Trust – how you want your estate divided after your death
⇒ Durable Power of Attorney – someone you have chosen to make decisions about your health, both physical and financial
⇒ Living Will – instructions about your health care
These are just some of the basics of estate planning. The bottom line with this as well as all other money management is a 4-letter word: P L A N.

7. Learn to Earn

⇒ Learn How Money Works, How Debt Works, and How Spending Works

Become financially literate. Start with small sums and grow them into larger sums. Put the larger sums to work. Plan for the future – that house, that college education, that retirement.
Always continue to learn. The more you know about your money and how to control it – rather than it controlling you, the happier and more at peace you are.

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