Moneywise24 Personal Finance

If I think about it, I started developing my own personal finance strategy about only 3 years ago, at the age of 30. Although I did study International Business, I had never thought about viewing myself as a business of its own, and I was pretty much stuck in a routine of balancing out income and expenses each month, and avoiding any risk that could eat up my money. However, as I got more and more involved into personal finance, I started to develop a strategy, a vision, which I working towards. I am gaining much more knowledge than previously, since the topic genuinely interests me.

Now that I think about it, personal finance is pretty sexy. And there are three main reasons why I think so:

Being independent is sexy

I have always considered myself to be pretty independent. Still, my actions were very much outward focused, getting oriented by what is normal, or what is supposed to be. I would often buy something, because everyone had it, or often I would feel ‘poor’, since others were doing better in their own way.

Personal Finance has taught me to act from an inner peace of mind; my actions are now not based on my environment, the news, or marketing, but largely on what I want to achieve in my life. I take into account my vision, my goals, and work towards it step by step. This way of thinking gives me a true feeling of being independent… and that is very sexy.

Actively participating in the economy is sexy

Active personal finance management means investing a larger or smaller proportion of your money. And as soon as you invest it, you are participating in the economy. You are taking a slice of your own, call them stocks, call them mutual funds, options, or bonds… in the end you are actively engaged in economic developments, and in society. As opposed to someone who does not invest, but only spends his money… he is basically throwing his money to others, who will invest it on their turn.

Bookkeeping is sexy

I am not a professional bookkeeper, but I do track all my income and expenses each and every day. If I ask some person, I find that few can actually tell me how much they earn (up to the Dollar), or how much they spent last month on food and beverage. How much did they invest? How is their allocation between cash, stocks, and other products?

I know all that, and it makes me feel good. It allows me to identify things that go well, things that don’t go well, but most importantly it allows me to track my progress over time. Seeing my wealth grow on the screen is damn sexy.

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We all want a big estate, a powerful car, stylish clothes from the finest brands, and so on. While many of these things certainly can be realised, having a grip on your finances is all about identifying your own and personal ‘needs’ and ‘wants’, and acting accordingly.

Let us look at what a ‘need’ is in the first place. Basically, a ‘need’ is anything which makes it possible for you to live in a safe environment and to reproduce, at least that’s how I look at it. This includes food, water, shelter, love and sex (including also social contacts). Be honest to yourself: do you really need anything else to survive? However, these basic needs may cause you to live fairly uncomfortable in the modern world. For this reason, I want to take it one step further for the purpose of this article and re-define what a ‘need’ is:

A ‘need’ is anything which makes it possible for a human being and his/her family to life a comfortable and exciting life.

Following this definition, what a person needs differs per individual. No two individuals are completely the same, and their needs may lie far apart.

Have you ever heard one of your friends say ‘but I needed this new pair of shoes’, knowing that the pair will end up in the closet together with 52 other pairs? Probably yes, and this is the essence why many people end up in a situation of debt, sometimes so severe that there is no way out of it but to file for personal bankruptcy (if you are such a person, please seek professional help from an independent advisor; the information on this website will not be sufficient to eliminate your debt).

Knowing the difference between needs and wants, it is essential to ask this question each time. If you are not used to it, it is very easy to let yourself go in the process. If you have a credit card readily available, it does not make things easier. The essence is that each purchase should contribute to the quality of your life significantly; it should enhance and enrich your life. If this is not the case, you may do yourself a big favour and leave the item where it is.

Reminding myself of my own definitions of ‘needs’ and ‘wants’ have significantly helped me to keep my own finances in control.

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I have a few questions for you: Do you know your monthly net wage? Do you know how much money you spent on groceries last week? If you consolidate all of your accounts, including checking accounts, credit cards, and investments, how did your assets and liabilities develop per month during the past 6 months?  

These may seem some tricky questions perhaps, but how can you maintain a grip on your finances if you are not able to see how your finances develop over time, or if you can’t match your budget with your actual expenses? Making your finances transparent and visible is perhaps one of the first essential steps in gaining financial control.

 Doing your very personal bookkeeping means making your finances transparent. Bookkeeping does not need to be as boring as many people imagine it to be. Actually, it can be great fun, since you are actually seeing how, for example, specific changes in purchasing behaviour have a direct impact on your financial strength. Generally, Bookkeeping requires nothing more than a piece of paper (or a pre-printed book of household accounts) and a pencil. You will require separate columns for the following information: 

• Date of the transaction
• Credit amount, or the amount you received
• Debit amount, or the amount you spent
• Transaction category (e.g. groceries, real estate, living, automotive. You can define your own categories as you see fit).
• Payee
• Description / further comments

Alternatively, you can use a programme such as Microsoft Excel. Microsoft Excel offers the benefit, that you are able to set filters easily and create statistics. For example, if you would like to gain an insight on how much money you spent on automotive last month, you can set the appropriate filters and Excel will calculate this information.

If you are looking for an all-round solution, which allows you not only to do your daily bookkeeping, but also assist you in evaluating the results, you may want to consider purchasing a product such as Microsoft Money or Quicken. These programmes are specifically designed for personal finance purposes. They allow you to create multiple accounts, categories, budgets, and to enter all your transactions. In the background the programme will evaluate the data, and the programme may supply you with all the information you need.  Additionally, such programmes often allow its users to do research on companies and shares, and to plan possible future scenarios.

 The benefit of using personal finance software is tremendous; if administered regularly and precisely, you will know exactly where your money is coming from and where it is going to. Once you have your finances visible, it will allow you to make changes to how you handle money and the success over time.

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We hear stories about self-made millionaire and people who made it from being a cook to owning a private jet. We often tend to treat such people as ‘being lucky’, or we feel the need to state that they probably had the help of a wealthy uncle or family. Seldom, however, we really try to understand what goes on in the mind of someone who truly ‘made it’, and more importantly, trying to learn from it.

 Responsibility

 If you take the time to read and compare different biographies from the rich and the famous, such as Bill Gates or Donald Trump, you will soon find that they have one big thing in common: they take responsibility for their lives. They strongly believe, and live by, the fact that every person is in the position to shape his/her future. The saying “your life as it is today is the result of your past actions” could not apply more.

 The first step in adopting the mindset of a millionaire is to be responsible for your own life. Life does not just happen to you; you are in control of it, as far as it is possible. Understanding what you do today shape your future is where you want to begin. Sometimes, you may experience faith, how unpleasant it may be. However, a true winner will simply accept this as a part of life, and move on, self-confidently, and write the next chapter in his life.

 Value your time

 Be honest to yourself for second: could you imagine Donald Trump sit in front of the television, watching a soap opera? Of course not, millionaires value their time, since they understand this will bring them further in life. In fact, television, computer games, or any activity which does not intend to enrich your life in some way or the other, is a waste of time.

 In stead, go out and become active. Engage in social activities, do sports, keep your living place tidy and clean, study, travel, and do whatever is necessary to keep moving forward in life. Spend your time as efficiently as you can, and grasp the opportunities that cross your path. Becoming active on the one side will also stimulate you to become pro-active, a key characteristic of wealthy people. Being pro-active means identifying opportunities, and doing something constructive with it. The best time to do things is not later, or tomorrow. It is now.

 Insist on quality

 No matter whether you are buying an item, making an investment, or delivering work yourself: insist on the highest possible quality, always. It is completely useless to buy a low-quality item which needs replacement after a short time, in the end you will spend more money on buying countless of low-quality items than you would have on one high-quality item. The same applies if you are delivering work as an employer or entrepreneur: your own image and that of your product will depend much on the quality you deliver. Delivering a high quality of work, for example, will make you stand out above the masses, and your managers will identify you with the quality you deliver. This makes your position for salary raises or promotions stronger.

 Do not fear

 Fear is the enemy of any successful person. Fear is nothing more than a physical reaction of the body, which indicates that you are about to enter into a situation, which might be life-threatening. However, being successful also means taking risks. Building a business means investing money, with the potential of losing it. The same applies for investments, or even switching jobs. However, with the right mindset, you can limit any potential negative outcome. If you insist on efficiency and quality in your life, you are likely to deliver an excellent job, which will only astonish your future manager.

 The four characteristics described above are only the tip of the iceberg. By the way, this does not only apply to building wealth, but also applies to being successful in general and leading a happy and fulfilling life. Once you understand, and live by, the main principles of what make people successful and happy, nothing can stand in your way.

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