Managing money well depends on the strategies you follow. You may not realize that you’re following strategies, some for better, others for worse. Procrastination, for instance, is a common strategy people follow with their money. When they see a money problem, they’ll deliberately put it off, hoping it will go away, when deep down, they know it won’t. Ignorance is another common strategy people follow with their money. They assume that the less they know, the better, when they should instead find out. So, adopt the following sound strategies. Otherwise, you’ll follow silent strategies that aren’t sound.
Earnings
Make your earnings not just a given but a strategy. Earnings are generally the first ingredient for financial success. How much money you or your other household members earn matters. You can generally earn more or less, depending on what you decide. But how much you earn isn’t the only important factor. To win at managing your money, you also need to earn consistently, with no gaps or only short-term gaps. You can strategize over earnings. Earnings aren’t a given. They can fluctuate, and you have some control over them. Your earnings strategy matters to your financial success.
⤠ Diligent plans lead to profit. ⤟
Wisdom
Make money wisdom another money strategy. Making a lot of money doesn’t guarantee financial success. The more you earn, the more you spend. People with high income can have lousy finances. Conversely, people with modest or low income can have outstanding finances. Over the long haul, sound financial practices can do very well for just about anyone. High income is not necessary. Wisdom in finances is the bigger key to long-term success. Make the right money decisions based on the right principles, and you’ll soon see the difference.
Knowledge
Make money knowledge another strategy. Know money. Financial knowledge is powerful. With knowledge, you should feel more connected, engaged, and in control. Knowing money helps you recognize what you and your family are trying to achieve with your finances. Share your knowledge with your family. Commit to common money goals, while knowing how to achieve them.
Meet Erin, who was just 21 years old at her college graduation, among the youngest of her classmates. Her hard work in college paid dividends. She made the honor roll, graduating near the top of her class. After graduation, she took a full-time job at a company where she had interned the prior two summers. Yet as confident as Erin was in her job skills, she had no knowledge or experience when it came to money. For now, she trusted that her natural caution about money would serve her well enough. But her considerable educational debt worried her, as debt worried many of her classmates. She knew that she needed to give her finances thought and learn more about money.
Responsibility
Make responsibility another money strategy. To win at money management, you must be responsible with your money, meaning accountable for how you manage it. Responsibility increases your likelihood of being able to pay the mortgage or rent, put food on the table, and buy clothes and other necessities. It also increases your likelihood of retiring at a reasonable age with reasonable financial security and leaving a legacy to your children or charitable or religious causes. Whatever your financial goals are, they depend on your responsibility for managing your money. Don’t throw it to the wind. Sow the wind, reap the whirlwind.
⤠ Haste leads to poverty. ⤟
Attitude
Make your attitude toward money another strategy. Don’t live for money. Don’t make money your identity or even your security. Don’t even work solely for money. People have lots of dishonest, criminal, and corrupt ways of making money that they shouldn’t pursue. You deserve a fair wage for a fair day’s work in an honest business, trade, or profession. The right attitude toward money is that it is not the goal but rather an important and appropriate subject in pursuit of other goals. The author of the book Rich Dad, Poor Dad says that even if we wish to make lots of money, we should work to learn rather than to earn. While others work for money, the rich make money work for them. To gain riches, seek broad practical knowledge.
Behavior
Make modifying your behavior another strategy. Attitude and knowledge are important to financial success because they affect your behavior. Your finances ultimately depend on your behavior. For better or worse, emotions affect behavior. Study after study shows the losses people incur when following their emotions on spending and investments. We follow the herd, assume attitudes of overconfidence, and act or refuse to act out of fear. Instead, we should assess rationally and then modify our behavior.
⤠ Laziness makes you poor, while diligence brings wealth. ⤟
Reliability
Make reliability and consistency other strategies. Be faithful with the small things around your money, or you may never get the chance to handle the large things of finance. When you find something that works, stick with it. Treat your money reliably and consistently, whether you can afford to lose it or not. Just because you are gaining, don’t throw your gains away. The study The Millionaire Mind reports that millionaires treat integrity and discipline as the foundations for financial success. Skills, a supportive spouse, and hard work follow. You don’t need a lot of money to feel secure and content. Consistent and reliable money management are better at giving you peace of mind as to your finances. Contentment does not come from quantity but from right attitudes and practices. Doing one thing with your money denies you the opportunity to do something else. Consistently reliable money decisions work best.
Conservatism
Make conservatism another money strategy. Conservatism means recognizing losses as soon as you see them coming but gains only when they actually occur. Conservatism steadies your financial boat. Conservatism keeps you from having to make crisis decisions at the last moment. Better that gains surprise you than losses. By accounting for losses well in advance, you can generally make better decisions that will soften their hard consequences. Don’t manage money with rose-colored glasses. Take a hard look, and act accordingly. It’ll soften your landing.
Goals
Make financial goals another strategy. Setting financial goals doesn’t mean you are greedy. Financial goals can help you reach other personal and family goals, including goals for your education, career, mental and physical fitness, charitable giving, and spiritual life. Your financial success can mean more time with the family, more recreational and creative time, and time for travel, volunteer service, community or professional leadership, and participation in the arts and cultural events. Set financial goals, and then make those goals part of your broader life success.
⤠ Generous giving opens heaven’s floodgates to countless blessings. ⤟
Sufficiency
Make sufficiency another strategy. More money is not always better. Enough is enough. While stable finances can help make for a stable life, earning more income and having more money in the bank is not likely to make you much happier. The book How to Be Richer, Smarter, and Better-Looking than Your Parents shows that happiness increases only until you reach median household income. The richest Americans are no happier than the rest of us. Americans are less happy today than 70 years ago, despite earning twice as much. Americans with increasing income over ten years are no happier than those whose incomes remain the same. And individuals wearing an expensive watch are no happier than those who do not.
Change
Make expecting change another strategy. Expect your earnings, expenses, and circumstances to change. And expect your goals to change along with them. Your first financial goals may be to build a cushion and then to reduce debt. You may want to pay cash for a car and then for a new car. You may want to own your own home, free of debt. You may also have big money goals, like to start your own foundation, or big life goals that require money, like taking a year off to travel around the world. Set both short-term and long-term financial goals, even if you have little confidence that you’ll reach your long-term goals. If you do not articulate your own goals, someone else will do so for you. And don’t hesitate to change goals as you discern your best path forward.
Meet Pat, who was 28 years old at his college graduation after having spent a few years in the trades before starting night school. A “people person,” Pat loved his college co-curricular programs, although classroom studies not so much. Pat’s prior savings, part-time work throughout college, and night-school program enabled him to graduate with only modest educational debt. He had little concern for paying off that debt from the sales-rep job he took after graduation. He knew the job wasn’t a career. He’d figure that out later.
Planning
Make planning another strategy. Achieving goals requires planning. President Eisenhower, whose military leadership proved critical to the Allies winning World War II, gets credit for saying plans are useless but planning indispensable. To succeed with money, you must look forward, even if what happens seldom precisely meets your plan. Reacting and changing is natural. But without a plan, you’re leaving financial success to chance. Nearly all of the millionaires The Millionaire Mind studied planned for their financial success. Planning means choosing outcomes.
⤠ Don’t love money. Be content with what you have. ⤟
Implementation
Make implementing your plan another strategy. Planning isn’t enough. You must carry out your plan. Have a bias toward action, not inaction. Implement your plan, even as you assess and adjust it. Plans align your actions to your intentions. Have a plan, and then work the plan. Think of it as an iterative process: plan, implement, assess, adjust, and then do it all over again. Make financial plans, then implement and adjust them.
Variance
Make measuring variance another strategy. Few things happen exactly according to plan. How far things depart from your plan is important. Notice the departures. Measure how far you’ve wandered from your financial plan. The difference between your plan and where you stand is important. That variation tells you important things, maybe about your earnings, expenses, or plan. Take stock of how far off you ended up from your plan. Learn from the variance. The variance is reality telling you things, sometimes good things, other times neutral or bad things. Study variance. It has a lesson to teach you.
Distractions
Make dealing with distractions another strategy. Managing your money isn’t all that hard. Managing your money around all the distractions is the hard thing. The challenge is finding the time among your life’s other demands and distractions. Don’t put your money management up against other things. Money management will lose if you do. Whatever your distractions may be, whether social media, television, gaming, or a hundred other things, they’re all more attractive than managing your money. But they’re not as important. Expect distractions. Manage your money anyway. Never make an excuse for failing to manage your money. It’s on you. With a little early discipline, it will soon seem as natural as breathing. As the 17th-century English clergyman Thomas Fuller said, All things are difficult before they are easy.
⤠ Whoever loves money never has enough. ⤟
Obstacles
Finally, make a strategy of expecting obstacles while believing that you’ll overcome them. Money management is like everything else in life: uncertain, filled with twists, turns, and surprises. But the twists and turns are not your real challenge. Your real challenge is maintaining your commitment to your success. Your challenges are mental, emotional, and spiritual, more so than financial. The book Rich Dad, Poor Dad lists fear of failure as the number one obstacle to successful money management. Cynicism must have no place in your money management. Nor should arrogance or ignorance. Enjoy the journey toward financial intelligence and success.
Checklist
Reflect, research, investigate, and act until you can affirm each of the following statements summarizing the advice and counsel in this section:
I am able to make a reasonable living without sacrificing my personal commitments and life balance.
Financial success is not all about making lots of money but includes being wise in how to handle it.
My financial irresponsibility would threaten my ability to continue to earn a living and enjoy life.
My healthy attitude toward money will go a long way toward my work/life balance and personal and financial success.
I have shared my commitment to financial goals with all individuals who depend financially on me.
I have begun a personal financial plan.