Managing Money
Proactive in money management, utilising robust disciplines to optimise long-term financial well being
Five Ways to Wealth. In an analysis of self-made millionaires, financial fortunes are made by:
- being a successful entrepreneur. Start and build a profitable business.
- working your way up. Join a successful organisation, get promoted and achieve an executive position and ensure you have share options
- achieving professional excellence. Get to the top of your professional ladder and leverage your expertise to bill well for your services
- selling. Pursue a sales career and become excellent in selling a product or service
- play the stock market. Invest wisely in the stock market over the long run. But remember this is the most difficult and riskiest route.
Which represents your route to financial security? Have you thought through the options and implications? A mix of different strategies or a combination of approaches?
Talk through financial matters with your partner and significant others. Don’t assume that others will share your attitudes towards money, your current concerns or long term aspirations. Keep an open dialogue with others involved in your financial affairs to discuss any worries as well as hopes and plans. Don’t impose your financial outlook on others. But do discuss frankly your expectations to come to a shared understanding of priorities.
Make money from your “stuff”. Your home is probably full of: gifts you don’t like, purchases that you’ve never used, and other items that have outlived their usefulness. Go through all the possessions in your household. Which have you used and enjoyed using in the last 6 months? Which have made a positive difference to your life (it is functional, beautiful or of genuine emotional value). Anything that isn’t, get rid of. Sell it on Ebay.
Know where money management is taking you. What do you plan to do with your money? What kind of life will it create for you? What kind of person will it help you become? Is your financial discipline working positively for you, creating a big hearted and generous spirit? Or is it “shrinking” you, making you more introspective and insular?
Put money into perspective. Make money work positively for you in pursuit of your long-term goals, but don’t see it as an end in itself. Know why money management is important to you and how it is helping you advance your goals. It is only the miser, hoarding money under the “mattress” who views the accumulation of money as an end in itself. For most, money is a means to an end. Know what that end-point is for you.
You can’t take it with you. Money is to be used for life enjoyment and fulfilment, not in a reckless and profligate manner, but to help you achieve your objectives – your personal goals, goals for your immediate and extended family, your local community and wider society.
Assess your “opportunity costs.” These are the costs of foregone opportunities, the costs of not doing something while you are doing something else less profitable. You might run a “tight ship” in which you control costs through good budget management and a frugal life style. But have you assessed the financial impact of this strategy? Are you missing chances to make money through a concern only for cost reduction rather than revenue generation? Evaluate your opportunity costs as aggressively as the direct costs of your current activity.
Exercise financial stewardship. Effective money management opens up options to make a real difference to others’ lives – your immediate family, extended social network and the wider community. Use your judgement to assess how you can best contribute to others’ lives. Review the full range of your responsibilities and obligations to establish priorities. Then be proactive in your plans. Don’t find yourself reacting to others’ demands.
Don’t discuss your financial affairs. Keep your financial status to yourself and your intimate circle, never discussing your income or assets openly with others. Let them draw their own conclusions, correct or incorrect, but don’t make it easy for others to comment on your financial position.
Encourage good financial habits in your children. Don’t assume that your attention to monetary matters will pass through the genes. You need to educate your children in the disciplines of spending, budgeting and saving. Don’t allow any financial success you have attained create a family culture of entitlement. You are not a permanent piggy bank; don’t allow your children to think you are.
Don’t loan money to family or friends. Despite the pressure to do the “right thing” and support those experiencing financial hardship, don’t loan money. Either give the money and then forget about it (but remember the grateful recipient may resent you later) or provide alternative material support.