Money Management - 2015

I remember waking up as a child, turning on the television and seeing some good living.  In the movies, the families always had the funds to take that weekend trip or buy that new crib for their kid.  In the shows, the teenagers would always put together the funds to start these projects that wouldn't pan out.  Zach Morris could eat out with his friends every single day in Saved By the Bell... not a single home cooked meal.  It often occurs that perception is reality.

Unless you've got a guaranteed inheritance coming your way (and let's remember that outside of Zach Morris there is no such thing as a free lunch), then managing money is a crucial practice to any person of any age.  If we would like to be financially stable, financially successful, and to have financial longevity, then we should make ourselves familiar with a deposit slip.

I've been asked by my peers, young and old, "why save"?  When do I save?  How do I save?  I tell them that their best bet is to ask a financial advisor, but I will be happy to guide them with the information that I do have.  I've been told by my peers, young and old, "I'll save later".  In my opinion, it is never too late to save, but there is no better time than now.  Managing money earlier in life comes with some benefits as well.  The toughest part is getting started.

Setting a budget is not a bad idea.  To many of us, that means going on a financial diet.  Setting a budget is essentially just writing down or recording what you spend per month, per week, or per day.  For some, that number could be $30 a week and for some it will be $30,000 a week.  Shoutout to the people spending $30,000 a week... You can reach me at... Just kidding.  Anyway, setting a budget is a good place to start; so many of us become surprised at just how much we spend and what we spend it on.

Cutting expenses and maximizing net profit.  Cutting expenses does not mean getting rid of the things you enjoy the most.  Maximizing profit does not mean hustling from nine to five and beyond.  Look at a budget and supplement where you can, cut expenses.  Try eating out a few less times per week, maybe park a bit further away and take the walk rather than paying $20 to park at the door of the event, maybe turn off the lights in your house when you leave, if you're a really brave soul maybe avoid seeing all nine Taylor Swift concerts that come to your city in a year and cut it to six or seven.  However, it is understood if you've gotta get your Taylor Swift fix, I'm an Ellie Goulding fan myself.

If you want to maximize profit then examine the way that your money comes in and see how you can place your focus on what is financially advantageous.  Look for ways to double up with sacrificing quality.  Feel comfortable to work extra hours if you enjoy your job.  We would all like to have passive income, it takes time to build wealth though.  Time is a larger factor when it comes to the maintenance of wealth.  The largest piece of advice that I can provide is to hit the bank before you hit the store.

If you're a competitive person then you can make it a game versus yourself.  It is referring to what you can manage to leave in the bank.  If you don't have a checking account then get one. We are in a digital age where paying everything in cash is safe and does not incur debt, but it often leaves us living check to check and our financial life's worth can be taken with the snap of a finger.  We are never to young or too old to get a savings account.  This is the first step to having money that is not accessible to the swipe of a debit card without having to do some leg work to transfer it over.  Another benefit is that a savings account starts the process of building interest for you.  It is not much but the earlier you start, the larger it can grow.

There are so many ways to manage money and save in this day and age.  Direct deposit is a good way to make sure that your money sees the bank before it sees the hair salon.  If you have an employer with a 401K plan and will give you a percent or even match what you put into it then why haven't you signed up yet?  Creating an IRA in any form (like a Roth IRA) isn't a bad idea.  Saving for your retirement is crucial to financial security in the future.  There is a limit on the amount that you can put in per year because of the tax benefits that you receive; so again, the sooner you start, the more you can accumulate.  Having a brokerage account will put your money in a place that has it ready to transfer into an IRA or another institutional saving mechanism.  It is also a place to become familiar with, if you want to invest.  

Investing is something to see a financial advisor about.  What I will say is that we should not shy away from it until we have done our homework on the details.  Many people allow their brain to trigger straight to "Stock Market Risk", but the reality is that there are tons of ways to invest from high risk and high reward, to low risk and low reward, stocks, bonds, mutual funds, and more.  If you're older and looking at ten-year, social security, pension, and things of that nature then explore life insurance and annuities.  Set yourself up for an easier road in your later years.

Design a plan for yourself.  Everyone's financial situation is different and everyone who does save has experienced different advice.  Some say 10 percent, some say 15, some say 50.  It is all dependent on what your budget says and what your goals are; not to mention who else you're responsible for.  What is certain is that we can all save, it may take more sacrifice for some than others.  See a financial advisor and make a plan of your own.  The plan that I like to provide to people is: as soon as you get your check, take away 30 percent.  Put 10 in investment, 10 in an emergency account (sickness, house repair, new tires, etc.), and 10 in another miscellaneous account.  That can range from an account for your spouse and kids, an account for your school fees, an account for your travel expenses, if you're a driver that learned at the Ricky Bobby school of driving or a California resident that parks at meters regularly then perhaps an account just for traffic tickets.   After that 30 percent is accounted for and in the bank then manage your budget from there.  Use a percentage to pay off loans, car payments, mortgage payments, etc.  Use a percentage for your bills like cell phone, gas, electric, water, etc.  Take a good look at what you spend on gas and food and consider putting it on a credit card and paying it off as you go throughout the month, rather than at the end of the month.  That way, using a credit card, you can gain the benefits like miles or cash back while keeping your credit score on point.  Once that budget is figured out then use the rest on leisure, fun, and whatever else you want.  If you're someone that has no bills then consider saving more, or you can just splurge more than the rest of us.  If you have heavy amount of debt and don't feel as if you can't save.  Pay off the debts that have the highest interest first and then just chip away.  You will get there in time, just remember to pay that bill of debt every month before you pay for the latest Jordan shoes. 

I have found that the best way to stay consistent is to surround ourselves with people that manage money well and people that save.  We follow suit of who we are with often.  So, if our friends want to eat out then we will often eat out.  If our friends want to catch the Laker game then we will want to catch the Laker game.  Kevin Hart had a humorous stand-up skit about when he first got famous and was hanging out with some rich people.  In "Laugh At My Pain" he talks about staying in your lane (check it out).  

Big picture, live within your means.  It is not realistic to buy the $40,000 car with $5,000 to our name.  Set a money management plan early on and make it determined by your current state.  If you'd like to be more independent then this would be a good place to start.  The last thing that I recommend that you do is rely on another person for current of future financial security.  Besides, it is more rewarding when we reach our goals by putting in the work.  Have a good Saturday and enjoy that coffee.

- Lion

Chris P Austin