I was listening to the Dave Ramsey show during work one afternoon as I always did, and he offered a caller a peculiar piece of advice that stuck with me. The caller had all sorts of debt and had nothing to show for himself, and Dave asked the caller “If you were hired to handle money for a business called You, Inc. could you do it?” The caller responded that he could. Dave then asked the caller if he had been running a business’s finances in the manner that he ran his personal life, would he get fired? Most probably, yes.
Here are the facts. Most people do not do smart things with money because they make emotional decisions with their money. When it is someone else’s money, they do not make emotional decisions because it’s not their money. It’s much easier to be smart with someone else’s money than our own. To be successful with money, you have to break the tie between your emotions and your purchasing habits. The only way to do this is to run your financial life as if you were running a business called Me, Inc.
If you were to run a business, would you do it with just a checkbook and make a financial decision if it sounded like a pretty good idea? Of course not, you would want to maximize your return on investment and keep a close eye on your expenses. You have to be able to track where your money is going, not just for one month, do it for every month. Use a QuickBooks, Microsoft Money, or a fancy Excel Spreadsheet.
You would never run a business without a financial plan and an annual budget for the business, and you should never run your personal life without those things either. You need to have a list of financial goals that you want to achieve. You can’t just say that “I want to save for retirement.” You have to specify how much you want to save for retirement, where that money is coming from, where it’s going to be invested, and when it’s going to be invested. Use specific goals. Doing a budget every single month is also a must. If you’ve never done a budget before, there are plenty of great free budget forms online.
Most people fail to do research and planning with money, and in the end, it just slips away from them. You have to be intentional about your finances. Research as to what you should be doing with your money, have a specific financial plan, do a budget, and don’t let your emotions get the best of you when it comes to making purchases!