Sunday, January 1, 2012

Only 5 Things Can be Done With Money

I keep my financial records in old fashioned three ring notebooks. Every year I go out and buy a new one and a package of tab sheets to the store the record of what I am doing with my money. What is in these notebooks plus what you will find in my check registers would be sufficient to give you a very good picture of who I am and how I choose to live my life.

First of all I am the kind of guy who keeps his records in chronologically ordered three ring notebooks. That will tell you I am organized and hopelessly old school. If I lived in the 21st century, I would be using my computer to store this data. What would your record keeping methods tell me about you? Is it a big disorganized mess? Is your checkbook balanced? Do you keep a detailed Excel spreadsheet with explanatory notes?

There are really only five things we can do with our money. If we look at our records, if we have records, with honesty we will be given a great deal of insight as to who we are and how we choose to live our life. Do you like your self portrait?

1) How do you earn your money?

This is the obvious one that everyone notices. We are all guilty of comparing ourselves to others. He has a better job than I do. I earn more money than he does. I want my daughter to marry a nice doctor. The list is endless. “Do I have a job?” is both a serious and important question in this economy. The second question is, “Do I like my job?” Ultimately it is better to be happy with how you spend your working life. Sometimes, in order to earn enough money to support your family compromises are required, but still it is better if you find a way to monetize your life’s passion.

2) How do you spend your money?

Pull out that check register, or debit card record, or keep track of that cash you spend every day. Where is it going? If someone looked at your records, who would they see? THEY are looking at your record. Perhaps you should spend some time examining yourself. The credit bureaus and the great corporations know where your money is going, shouldn’t you? We all know about credit scores, but did you know that Sam’s Club is timing the coupons it sends you to match your buying patterns? If you buy 3 giant boxes of breakfast cereal this week, they will wait a while before sending you a breakfast cereal coupon. Do you spend money you don’t have on things you don’t need? Just asking.

3) How do you save your money?

In order to have financial freedom of action, it is necessary to save money. It is the first step towards wealth. What percentage of your after tax income goes into savings? Pay yourself 10% first is a common recommendation. Before you pay any bills or buy anything, put 10% in a savings account or a money market fund. Hard to do? Maybe you should spend a little less. If you are driving hard toward an important goal, that savings number might be a lot higher than 10%. Imagine, a 15 year old boy saving to buy his first car. His savings are focused on a goal.

4) How do you invest your money?

When there is sufficient money in your savings account, where does it go? Consider investment as buying something that pays you money to own it. The other extreme are things like cars and cell phones that cost you money to own. Are you a buy and hold investor? Are you a disciplined trader? Do you like to go bottom fishing, looking for bargain priced stocks and bonds or do you believe the trend is your friend? Both approaches are totally valid. Do you bury gold coins in the woods instead of storing them in a safety deposit box? Perhaps you fear the future devaluation of our currency and another government confiscation of privately held gold? If you are investing in gasoline, shotgun shells, and canned food I suspect you are preparing for the Road Warrior scenario. Do you have anything that is paying you money to own it? If you have investments, what kind of investments do you own?

5) How do you give your money?

How much money do you give away? Where does it go? The Old Testament standard was 10% to the temple for the works of God and the support of his ministers. In this new Dispensation of Freedom and Grace, how much of your income did you give to charitable works? What kind of charities and ministries did you support? How did you prioritize the distribution of these funds? Your giving will tell a lot about who you are and what you really value in this world and the world to come.

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