Occasionaly, Mr. Cents is extrodinarily supportive. Hence his decision not only to support me in the blog, but to contribute as well. I can't necessarily call this a "guest" post, because as I called the blog Our Common Cents, it applies to both of us. (Also, I am not-so-secretly hoping this is just one of a number of posts we will write together.) Needless to say, Mr. Cents' infinite widsom follows...
I (Mr. Cents) have been staunchly of the belief that money management is something of a common sense thing and that anyone in the death-spiral of debt is an idiot (I was included in this classification a couple years ago as well, and yes, I was an idiot).
My wife seems to think otherwise and has since made a *cough* blog *cough* in hopes to spread our good “cents” of money matters to other people around us.
I think, “Nobody gives a rat’s @$$ about what we think!”
She’s a bit more optimistic.
Anyhow… she convinced me to write up some of our thoughts on finance and she would post them for everyone to gawk at. If you have something else that works for you, great. Share your thoughts.
Our Seven Rules to Managing Money
1. Have Goals
2. Have Plans
3. Have a B Word
4. Follow the B Word
5. Keep Evolving
6. Be Honest
7. It’s Okay to Say No
1. Have Goals
Without a goal, you’ll never know where you’ll end up… The same can be said financially as well. Everybody should have some manner of financial goal in mind, and these can be driven by any number of factors be they altruistic or selfish. It is important though to keep these goals realistic, specific and current. Keeping your goals lofty yet within reach helps you stretch for something, yet not fail each time you try.
Specific goals are also used instead of vague one such as, “I want to be rich!” By avoiding subjective terms, you define your goals more accurately and can then judge how close you come in their achievement. Finally, by keeping your goals current and updated, you ensure that your budgets and financial decisions keep you on the path you wish to be on.
2. Have Plans
Without goals, there are no endings, and without plans there are no means to those ends. Plans enable us to take a step-by-step approach to achieving our financial goals and allow us to measure our progress along the way. Interestingly though, you should have multiple plans being enacted at any one time as you most likely have multiple goals you wish to accomplish.
While these plans might be as simple as a three step process to buy a vehicle in the next four years, they could be a complicated investment strategy to allow for overall financial independence by the time your 55. Either way, without these plans, we flounder around in a pool of meaningless numbers and often times waste precious little time trying to figure out what to do.
3. Have a “B” Word
Budgets are the necessary evil of personal finance, however they don’t have to be likened to torture as they often are. A properly made budget will not only safely guide people through financially troubling waters, but will also show you where you really spend your money.
Most people have not a clue as to where their money goes each month and are truly surprised when they have little money saved up. Unfortunately, as income increases throughout our lives, expenses have a tendency to as well. Budgets can minimize this affect or at least allow one to allocate this extra income in the most effective manner possible.
4. Follow the “B” Word
Having a budget is completely different than following a budget. This is what separates the proverbial “men from the boys” in personal finance. If a person isn’t able to track their spending throughout a month, then the budget they struggled so much to build means little. But don’t fret, there is hope in many forms now.
Following a budget in today’s world is easier than it ever has been what with the proliferation of new financial tools and programs such as Microsoft Money, Quicken, online banking, online credit card access, direct deposit and more. Using these tools means that personal finance, including payment of all bills, can be accomplished in little more than an hour a week and with few headaches. The tools are there. Use them!
5. Keep Evolving
In following all of the above advice, a person will often find they have more money, more financial freedom, or both. The accumulation of more money, income or investment opportunities means that goals, plans, and budgets will need to be revised over time. You may find that your goals will change, thus requiring revised plans, and in turn, these make you change your budget as well.
This is a natural progression in your financial life and should be welcomed. You will find that your budget will become a living, changing, evolving part of your financial livelihood, but in stunting this evolution, you will be inhibiting your overall financial growth as well. Don’t stifle this development, encourage it.
6. Be Honest
Financial matters are not meant to be secrets. Contrary to belief, you should not feel ashamed, appalled or intrusive by inquiring about the spending habits of your significant other (or yourself), especially if these spending habits affect the financial security of everyone else. Meaning, everyone involved needs to be informed, and above all, honest with each other.
A husband should know about the spending habits of his wife, just as a wife should know of the spending habits of her husband (and both of their children if any). Tiny details need not be delved into (as we will discuss at a later date), however the transaction amounts and categories need to be revealed honestly if you are to accurately follow and maintain a budget throughout your life. Bottom line, be honest and open, and keep everyone involved informed.
7. It’s Okay to Say No
Finally, with all of the financial crises of today (the credit crunch, the sub-prime mortgage mess, the end of social security, the increase in health-care costs, personal spending increasing, personal saving decreasing, etc…) it’s vital to know the most important lesson in personal finance… It’s okay to say no, especially if you can’t afford it.
You don’t have to keep up with the Jones’, especially since it’s most likely that they can’t even keep up with themselves. By the Jones’ I mean families that are spending way beyond their means and due to jealousy, envy, embarrassment or pure stupidity, their neighbors trying to keep up and are following them straight into the depths of financial oblivion because they can’t say no to their own impulses. This in turn makes the Jones’ need to spend more to keep up with their neighbors, driving them further into debt, and then their neighbors again spend more to keep up with the Jones’, etc… It’s a never ending deadly cycle that leads to world-wide devastating events such as recessions and diving economies, all because people can’t say “no,” or at least “not yet”.
In summary, you can’t spend more than you make and expect everything to be okay. Period. Let someone else commit financial suicide. Keep an eye out on your own financial matters and don’t be swayed by the stupidity of others.
We hope this makes cents (that is probably the worst pun I have ever made)…
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