The number one mistake people make with money is they don’t manage it. Why? Because they don’t know how to!
We know this to be true because, if they knew how to manage their money they would, and 78% of Americans wouldn’t be living paycheck to paycheck. And more than 3% of American 65 year olds would be able to write a check for $600.
Chris Hogan said, “The numbers change when people change.”
Things didn’t start improving for me until I began to make substantial changes in my life. The impetus that focused me were, (1) things learned from reading meaningful books, My Bondage and My Freedom, Rich Dad Poor Dad, The Millionaire Next Door, 12 Rules for Life, and Lectures on Faith to name a few, (2) recognizing my bad habits, and (3) a saying by Freddy Fri, “There is no loosing, we’re winning or we’re learning.”
How My Journey Began
One day while reading Frederick Douglas’ My Bondage and My Freedom I asked, “What is it that keeps one in bondage today?” After careful consideration, I created a list of 20 items I felt kept a man bound.
After careful consideration and additional reading, I then made a list of the habits of the wealthy and the habits of the poor. Combined, these lists shocked me. I was living a life on the wrong side of optimal.
That was the day I was open to listening to those more successful than I and that was the day my life started to change for the better.
Tips for Managing Your Money Better
1. Set Goals
2. Make a Zero-Based Budget
3. Look at Your Spending Habits
4. Learning from Others
My experience is that if any of these above points aren’t your current habits, most people, about 96%, won’t take this hard-earned advice. But for you, few, who are willing to win with money here is what I learned.
Vital to being successful with money is the ability to set specific goals and work to reach them. Procrastinate tomorrow. If you have no goals, you will obtain just that, nothing! Here’s what I’ve learned.
1. It must be specific
2. You must make it measurable
3. You must have a date of completion
4. What has to be true to make it happen?
5. It has to be your goal (i.e.: not your spouse’s goal)
6. It must be in writing
7. You must have a big reason why
A zero-based budget forces you to spend your money on paper before your bills arrive. List all of your bills and expenditures and commit to paying them and only them. If an expense comes up in the month, you either rearrange your budget or say, “No, it is not in this months budget,” and postpone until your next monthly budget. Do this a couple of times, and you will see that you are in control of your finances and you’ll like it!
Look at Your Spending Habits
With just a little self-control and a little planning, you can find areas where you can save a little, even a lot of money. I often shave off $30 – $50 a month from my food budget just by thinking through my meals the night before.
Another way I saved money was by keeping more of what I earned. I eliminated everything that had a payment and switched to paying with cash. I paid off my car, our phones, my student loan, everything! With no payments, my income, my only wealth building tool, was free to be used to build wealth.
Learning from Others
To be more financially savvy I asked questions of and listened to those who were being successful with money. I read books too. One big thing I learned was to buy assets first then prioritize my discretionary spending. And, when I just had to spend money, I would purchase a collectible or silver over an energy drink or a meal out.
Combined these simple steps now allow me to save over $1,000/m, contribute fully to my 401k, exercise more, understand my finances and communicate more clearly with my wife. All were impossible for most of the last 20 years.
By paying attention to my money, I have improved my life for the better. Thanks, Dave Ramsey!