Saturday, June 21, 2008

The world's simplest money management system revealed!

How many times have we heard, I have no money, what is there to manage?

Ok, time to put things straight:

#1 Even beggars have money- there's no such thing as not having money, either it's more or it's less, but you still have money

#2 Which leads us to a very important point- So, you do have money after all. But, wait, you whined, I don't have enough money to manage!!

The key is managing whatever you have, so you will have MORE.

Hands up to those of you who signed up auto debit payment (say for example: A gym membership for RM200) and don't even notice when the payment has been made? (the outflow of the money goes unnoticed as it is auto payment)

Take it another step, you decided to work out by jogging around your neighbourhood now and hence cancelled the gym membership. This effectively gives you an extra of RM200.00 to spend/ save/ invest.....sounds like a pretty good idea...or is it?

Through my experience of speaking with many friends, the extra money normally slipped out of their finger unnoticed! Yes, it was spent alright. But to where???

See, the thing is the money was spent, and they don't even get to experience the thrill of knowing what they spent....

If this is getting confusing, read on and you soon know the relevation!

Back to the money management tug of war...ready for the most ridiculously simple money management system ever???

Everytime you get paid an income (salary, bonus, rent,etc), before you do anything, before you pay ANYONE, that includes your bank, PAY YOURSELF FIRST!

Here's how to do it:

1. 10% goes into YOU- this is your Financial Freedom account. Not to spend, not to give away. You accumulate a decent enough amount then you put it into investment.

Note: Majority of people get a disease IBS or Itchy Butt Syndrome when they see a pool of money accumulated....and they SPEND it!! Hey, you worked to accumulate it to this handsome sum, you deserve it right? WRONG! You don't spend it at all! You reinvest and reinvest, never ever touching the capital!

You do this until you have reached the stage of (sing with me now) Financial FREEdom!! Or simply put, your passive income > expenses. When you are at this stage, you can spend the returns from the investments, but again, never from the capital.

It is only when you have income continuosly coming in whether you work or not that you can be freeeee, if not, its back to your rat race, baby.

2. 10% - Saving for future spending

This is for those gadgets, car, slimming program, child education, that you want. Save towards it. One of the major reason why so many people are in goddamn debts it's because of the wonderful 0% easy installment programs available! Darling, it's 0% interest, not 0% payment. You still need to pay for it! Do this often enough, and you find that all your income goes right into settling easy payment this and that, not so fun now isn't it?

Reality check, if you need to split RM5000 into installments, chances are you can't afford it. It hurts, I know.

3. 10% - Education

I'm not talking about kid's education. I'm talking about your education! Books, seminars, courses that can enrich your life, improve your mindset and adds value to you.

*4. 10% - Fun

Whoa ho ho, this is MY favourite!! As human beings are creature of comfort, we shy away from pain. So, if pain is inflicted, what do we do? We retaliate!

This lovely account is designed to give you pleasure, mm hmm. For this is the account that you can, you must, blow away every single cents in it within that month on anything you want!!

Try it, and tell me that you don't feel the thrill of planning what to spend, and when you spend it, it's 100% guilt free!

It's definitely better than not knowing what you spent on, and then you spend it anyway, end of the day, you don't know where has your money gone.

5. 55% - The blah blah

This is for the monthly expenses, debts....zzzzz.....enough said

Note: Some people will note that 55% is not even enough to cover their expenses....guess why we always feel broke?

6. 5% - Love

As good karma goes, in order to receive, you give. It's complete bullshit that you have no money to give. This account is dedicated for giving. It doesn't have to be donations to charity only, it can be a gift for someone who has helped you.

There you have it, TA DAH! The world's simplest $ management system.

The percentage serves as a guide. For some circumstances, you may temporarily need to increase the Blah Blah to 70%, just go ahead. But whatever it is, never lower your You account to less than 10%.


It's the habit that counts, not the amount. Even if you are in debts (who's not?), split it anyway.

If you keep on working to plough all money to clear the debts, you soon retaliate and will get into more debts (like attracts like).

If you keep on just saving, you will retaliate. You need to have fun a bit with your Fun account.

Open DIFFERENT bank account to hold all the 6 different monies. That way, you won't be tempted to dip into your You account for the latest mobile phone.

I find it easy to have jars in the house that I can then transfer to respective investments and bank accounts.

For You account, apart from the 10% that you deduct upon receiving your income, have another jar at home. End of the day, put whatever spare change you have, 10 cents, RM5.00, RM10.00 into it EVERY DAY. You will find that unknowingly you had additionally set aside a neat sum end of the month for you to invest and MAKE MORE MONEY! Really cool.

This method is basic financial planning way way back from ancient Babylon age (read the book Richest Man In Babylon).

I knew about it, but was I really practising it? No. Coz I was missing a few points- its simple, but not easy!

It's a habit that keeps the rich rich, and the middle class just over broke.

Bless Mr. T. Harv Ever- multi millionnaire. I've recently attended his seminar Millionnaire Mindset Intensive and was reintroduced to this concept.

And bless me for practising it every single day after I left his seminar!

Now, though I'm working to increasing my income, accumulating my wealth, settling debts (yes, yes, I have those buggers), I feel happy, in of all, I know end of the month, I have my Fun account to celebrate!! Hmm....what to buy next?....


Darlin said...

Brilliantly written. Only if we keep repeating the simple habit of paying yourself first...inflation buster.

I am smiling reading along, as I relates to me.

Unknown said...

damn long I skip skip skip....