So what should one do to manage money?
In my professional opinion, in order to know how to manage, you must learn how to watch where your money is flowing.
I know it may sound tedious to some but frankly, it's really easy and it's pretty fun actually. To be honest, I was put off with the idea at first, but learning to track my money for 1 month, I was having so much fun, I started tracking my partner's money and then to my friends' money! I had so much fun and my expenses went down so fast as by 30% in just 1 month that I knew I must share with everyone else in the world. It's not for a noble cause really, but I know how it feels like to live in scarcity and I don't want to see that in others. That's why I want so much to share this with you.
Money Management Technique Part 3
1. Track your money!
There are alot of sites out there but I love this one :
http://www.moneytrackin.com
I love this because I could tag the transaction and can download everything in excel spreadsheet and do my own charting, reporting, etc. (Urm, yes, it may sound a little obsessive but it's really fun!) Also, since it's online and it's free, you can quickly track your money the moment you spend it on your phone connected to the wireless. So it's a fast, easy and no hassle way of tracking your money.
Background Information :
About moneytrackin'
moneytrackin' is a free online webapp that allows you to track all your expenses and income easily and without effort, thus allowing you to have a clear view of your financial situation. It intends to be a simple yet powerful online budget management tool.
Main features
- Control as many accounts/projects as you want
- Log all your transactions (expenses/income) and tag them to organize them better
- Keep informed of your financial situation at a glance, viewing at any time where your money goes
- Share tips with other users and take advantage of the community knowledge to save money
- Anonymity, we respect your privacy
- Sharing budgets and collaborative working of many people together on the same account
- Public API to allow the integration with third party applications
For those who already have cash surplus, don't think you get to skive! Money is something you need to manage in order to master. So check through those expenses to see whether you can save more out of your expenses or maybe you're not enjoying yourself at all! In life, we need to strike a balance... remember hoarders? You need to learn to relax :)
Now that we have tracked your money... let's move on to the second part and the most exciting part (for me, at least!)
2. Systemize It!
What? What is there to systemize? Of course there is... I call it System 6! For those in Singapore, System 6 would sound like lottery. Actually, if you follow this closely, you will be able to harness what Einstein says it's the most powerful law in the Universe. And that will be the "Power of Compounding Interest".
System 6 taps on to this power without sacrificing all the fun, laughter, peace and joy that you may have. In fact, it will give you more fun, more laughter, more peace and more joy if you follow this!
And as a financial advisor, I will always advise my clients that in order to be rich and financially ready to be free, you need to learn just 1 thing :
PAY YOURSELF FIRST
System 6 will teach you to do this...
Ready?
This is so exciting... I can't wait to tell you all!
System 6
System 1 : Financial Freedom Fund (Triple Fs)
System 2 : Long Term Saving
System 3 : Short Term Savings
System 4 : Tithing
System 5 : Reward
System 6 : Expenditure
System 2 : Long Term Saving
System 3 : Short Term Savings
System 4 : Tithing
System 5 : Reward
System 6 : Expenditure
OK, fine, so what do you do with this? Simple! You track your money daily, remember daily! Not monthly! Not weekly! This is because humans are habitual beings so make tracking your habit and in no time, it will be second nature to you. Putting it off to the end of the week will warrant you to putting it off to the end of the month!
All you need is jjust these 2 things :-
- TRACK YOUR MONEY DAILY
- SPLIT YOUR MONEY ACCORDINGLY - PAY YOURSELF FIRST
Then when your pay arrives (once every fortnight or monthly), you will split yor money into these 6 accounts.
1. Financial Freedom Fund (10%)
This is the most implrtant account as your lifelong happiness depends on this. Tell me, who wants to have to work all the time for the rest of their lives? I mean, have to work not choose to work. there is a great difference here.
I would rather be financially free and choose to work just to keep myself happily occupied and surrounded with people I like to work with. Would you want to drag yourself daily out of bed and go to work only to face a lousy boss and gossip mongers as colleagues at the age of 60? NO! You should be enjoying life! Going for trips with family, rest, relax, enjoying time playing golf or your favourite game with friends, spend happy times at work cos it brings that extra income which you don't even need but it's just fun to do!
Great isn't it?
Then give yourself that 10%, you owe it to yourself. Remember, PAY YOURSELF FIRST!
2. Long Term Saving (10%)
I would call this your winter stack. Ha!
Generally, I would advise people to save at least 6 months into this account. You need to have 6 months worth of your current net income in this account BEFORE you can use it.
For those who think this is not enough, I will show you another rule of thumb I always use for my more prudent clients.
If your salary starts with 3, then you need at least 3 months to find another job and thus would need at least 3 months of current net income in this account.
If your salary starts with 6, then you need at least 6 months to find another job and therefore you would need at least 6 months of your current net income in this account.
You know the drill...
So how did I come up with such magical numbers? They're not magical. This is in accordance to the general Human Resources findings that people with a 3K salary, normally require about 3 months to find the next job.
I know some of you may ask, what about the current bear situation? I understand that being prudent is good, but overly-prudent can deprive you of grabbing the good opportunities that may come should you lock your money so tightly away.
Once you have your x months of your current net income in this account, you may choose to use this account to finance for your "big items" that you're dreaming of. that new big screen TV, family holiday, the downpayment for your 2th/3rd house perhaps? :)
3. Short Term Savings (10%)
For those who do not have a cash surplus and running into deficit and chalking up some debts, this is really important for you. You still need to save money. So split this into 2 : 5% goes into savings and 5% goes into debt repayment.
For those who have cash surpluses, put your whole 10% into this account. This account is good practise for spenders to help spend wisely and have enough for savings.
This account is good for investments. So with this current bear situation, start shopping for good deals and good investment opportunites, this is the fun dthat can help you grow your money!
4. Tithing (10%)
For Catholics and Christians out there, I know you are all too familiar with this. Tithing is a gesture of appreciation to God. He does not need this but it's for us to show that we thank Him for all that He has blessed us with and this small 10% is just an offering for Him in gratitude.
For those who there who may not have the same religion, please don't be offended with the name. Call it DONATE if you want to. This account is all about giving back to society. For whatever we reap, we sow it back. :)
So give it to your favourite charitable organization. You need to learn to give in order to receive even more...
5. Reward (10%)
For hoarders, I understand that the many years of stashing money may have deprive you of the pleasures you want to indulge but feel so guilty about. This is the account for you, this 10% is to be spent every month on the things you desire the most!
For spenders, I also understand that it may seem ridiculous to shrink your 100% or more spendings to a mere 10%. But do remember, there are alot of things that you hace spent on which you may not need. You need to learn to discipline yourself into deciphering what are the things you need and don't.
I read this on a website : Write the things you want to buy on a list and put it in your wallet. The trick is that you can only limit yourself o only 3 things. This helps you to prioritise your wants. Also, it also helps you buy some time off from impulsive buying. I know how you feel cos I was once like this. So just try this... it's not restricting you... it's just a new way of spending money :)
Would you rather have surplus or deficit? Think about it.
6. Expenditure (50%)
Last but not least, this is your expenditure account where your salary is creditted into. Daily neccesities should all come from this account.This is the most implrtant account as your lifelong happiness depends on this. Tell me, who wants to have to work all the time for the rest of their lives? I mean, have to work not choose to work. there is a great difference here.
I would rather be financially free and choose to work just to keep myself happily occupied and surrounded with people I like to work with. Would you want to drag yourself daily out of bed and go to work only to face a lousy boss and gossip mongers as colleagues at the age of 60? NO! You should be enjoying life! Going for trips with family, rest, relax, enjoying time playing golf or your favourite game with friends, spend happy times at work cos it brings that extra income which you don't even need but it's just fun to do!
Great isn't it?
Then give yourself that 10%, you owe it to yourself. Remember, PAY YOURSELF FIRST!
2. Long Term Saving (10%)
I would call this your winter stack. Ha!
Generally, I would advise people to save at least 6 months into this account. You need to have 6 months worth of your current net income in this account BEFORE you can use it.
For those who think this is not enough, I will show you another rule of thumb I always use for my more prudent clients.
If your salary starts with 3, then you need at least 3 months to find another job and thus would need at least 3 months of current net income in this account.
If your salary starts with 6, then you need at least 6 months to find another job and therefore you would need at least 6 months of your current net income in this account.
You know the drill...
So how did I come up with such magical numbers? They're not magical. This is in accordance to the general Human Resources findings that people with a 3K salary, normally require about 3 months to find the next job.
I know some of you may ask, what about the current bear situation? I understand that being prudent is good, but overly-prudent can deprive you of grabbing the good opportunities that may come should you lock your money so tightly away.
Once you have your x months of your current net income in this account, you may choose to use this account to finance for your "big items" that you're dreaming of. that new big screen TV, family holiday, the downpayment for your 2th/3rd house perhaps? :)
3. Short Term Savings (10%)
For those who do not have a cash surplus and running into deficit and chalking up some debts, this is really important for you. You still need to save money. So split this into 2 : 5% goes into savings and 5% goes into debt repayment.
For those who have cash surpluses, put your whole 10% into this account. This account is good practise for spenders to help spend wisely and have enough for savings.
This account is good for investments. So with this current bear situation, start shopping for good deals and good investment opportunites, this is the fun dthat can help you grow your money!
4. Tithing (10%)
For Catholics and Christians out there, I know you are all too familiar with this. Tithing is a gesture of appreciation to God. He does not need this but it's for us to show that we thank Him for all that He has blessed us with and this small 10% is just an offering for Him in gratitude.
For those who there who may not have the same religion, please don't be offended with the name. Call it DONATE if you want to. This account is all about giving back to society. For whatever we reap, we sow it back. :)
So give it to your favourite charitable organization. You need to learn to give in order to receive even more...
5. Reward (10%)
For hoarders, I understand that the many years of stashing money may have deprive you of the pleasures you want to indulge but feel so guilty about. This is the account for you, this 10% is to be spent every month on the things you desire the most!
For spenders, I also understand that it may seem ridiculous to shrink your 100% or more spendings to a mere 10%. But do remember, there are alot of things that you hace spent on which you may not need. You need to learn to discipline yourself into deciphering what are the things you need and don't.
I read this on a website : Write the things you want to buy on a list and put it in your wallet. The trick is that you can only limit yourself o only 3 things. This helps you to prioritise your wants. Also, it also helps you buy some time off from impulsive buying. I know how you feel cos I was once like this. So just try this... it's not restricting you... it's just a new way of spending money :)
Would you rather have surplus or deficit? Think about it.
6. Expenditure (50%)
In my professional opinion, this is 10% higher than what I normally advise my clients. But let's work on baby steps and 50% is a good enough amount.
So there.... track your money and follow this system 6. It's just 2 simple steps to mastering your money. Anyone can do it! I did it! So can you...
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