Strategies To Effective Money Management
Topics: Adam Khoo, Financial Freedom, Financial Planning, Personal Finance, Wealth Building
Before you can ever reduce your expenses and increase your savings, you must first know where your money is going to. Many people share the same experience of having no idea where their $5,000 salary went. ‘How did I spend so much money?’ ‘I thought that I should have $1,000 left at the end of the month, but it seems to have all disappeared!’
With a simple yet powerful system which I personally use together with specially designed Microsoft Excel templates like the ‘Monthly Personal Income Statements’ and ‘Daily Expense Sheets’, you just need to invest fifteen minutes a day to manage your money.
If you want to be wealthy, do not expect it to happen automatically. You must commit to spend time on your finances. Earlier on in this book, I talked about the millionaire’s daily hour. Millionaires spend an average of an hour a day on personal wealth management, while most people spend less than an hour a month, usually on paying bills.
So out of this one-hour a day, you’ve got to devote the first fifteen minutes to do these five Money Management Steps.
1) Always Ask for a Discount
If it is not a fixed price store, there is a 70% chance that you will get a discount if you just ask for it. If you get a 10% discount, it is equivalent to earning an immediate 10% return on your money. Over the long term, you will save a huge amount that will accelerate you even faster towards your targeted net worth.
2) Always Ask for a Receipt
Always get a receipt so that you can track every single expense at the end of the day and, if possible, claim it as a business expense and get a tax deduction.
3) At the End of the Day, Record all Expenses in your Daily Expense Sheet
You can do this manually in the sample ‘Daily Expense Sheet ‘at the end of the chapter or you can key it in electronically into a template.
I highly recommend you key it into an excel spreadsheet, so it can automatically add up the total each month.
4) Use a Credit Card Whenever You Can (but always pay the full outstanding sum every month)
Again, this will allow you a convenient way of having all your expenses recorded for you in the monthly statement.
5) At the End of the Month, Update Your Monthly Income Statement
At the end of every month, add up the total expenses from your daily expense sheet and update your monthly income statement. At the same time, update all your income for the month. Deduct your total expenses from your total income to get your monthly savings.
You must use a system to track where every single dollar goes. Only when you know where your money is going, can you take steps to channel it to your savings and investments.
Doing this month after month may seem tedious, but it is absolutely necessary if you want to build your wealth. Only when you develop the habit of managing your personal finances, can you manage the finances of your own business. So many people financially mismanage their businesses into bankruptcy because they mismanage their own finances. Don’t be one of them!
Adam Khoo is an entrepreneur, best-selling author and a self-made millionaire by the age of 26. Discover his million dollar secrets and claim your FREE bonus report ‘Get Out Of The Rat Race Now’ at www.SecretsOfSelf-MadeMillionaires.com
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