If you take one thing away from this website it is the DadCash mantra, "Money Management Survival Guide" if you will - there is only one way to show a profit both in business and in your personal life
"Make More Money Than You Spend"
The statement may sound very obvious but have a think about how many people, how many families, hand on heart, month on month, make more money than we spend. That is why there is a huge personal debt issue in the world today - people simply do not make more than they spend.
Here is a really simple home money management system that you can use to get on top of your finances and start to get to the situation where you truly "make more money than you spend"
A Simple Home Money Management System
The diagram shows a great starting point for good money management. You can of course use fancy software management tools to help you along the way (and we'll discuss some of those on the site), but if you want a process flow then just take out a pen and a piece of paper and follow the flowchart below.
1. Do You Spend More Than You Earn?
You should be able to answer this question fairly easily without adding everything up (which comes later)
Simply put - do you have money left over at the end of the month or not?
If you do then great - pat yourself on the back. Then recognize that there are still things you can do to improve your situation. If you don't have money left over - or are going into the red month on month - then follow the "NO" route
If you don't have money left then follow the "YES" route ...
2. "NO" - Look to Diversify Your Income
Diversifying your income is all about making any surplus money work for you.
You could do this through:
- Simple savings accounts
- Investing your money through appropriate schemes in your country
- Being philanthropic with your money
Then (if you don't do it already), then follow the "YES" route.
3. "YES" - Then You Need To Do Something About It
If you are going down the "YES" arrow then you need to take some action
Review Outgoings and Create Budgets
First step is to create a budget which includes all your outgoings and all your incomings. Your task is to balance them
On a sheet of paper write down 2 basic columns - the first column is "incomings" and the second "outgoings"
The first step is to understand exactly what is coming in and what is going out. The second step is to make it balance!
You can also review what goes out when - often it will help to schedule all outgoings to go out immediately after payday. Also look at smoothing out your utility bills to pay the same every month over the course of the year
4. Write Down 2-3 Ways You Can Increase Your Income
If you don't earn enough then look at ways to bring in more.
Here are some ideas
- Get promoted at work
- Get a new job
- Go contracting
- Get a second job
- Encourage your teens to earn their own money
- Find ways of making money in your local area
- Find ways of making money online
5. Write Down 2-3 Ways To Save Money
As a family there are many ways you can save money. Here are some examples:
- Reduce your utility bills
- Save on insurance
- Save money on groceries
- Eat out less
- Reduce your leisure activities and costs
6. Define Your Financial Goals
Last but not least you need to put all your finances into the context of your future financial goals
However, if you don't know what your financial goals are then this can be difficult
So define them. Look ahead 5 years - where do you want to be financially?
Then break down your 5 year goals into more immediate goals such as
- Paid off my mortgage
- Save to go on a cruise
- Earn xxxx
The money management process flow above is really the first steps to getting on top of your personal money situation.
Everyone (and every family) will be different but the ways which you deal with your money can be very similar
Enjoy the rest of the site