Discover more from Weekend Wisdom - Dan Isaacman
Audit Your Personal Finance | Budget
What is Your Relationship With Money & Financial Freedom
What is Money to You?
You might love money, you may hate it, but money is only a tool.
Each of us has our individual interpretations and some people think, it is a rigged system, while others see it is a game.
There are three steps to mastering money.
Step 2 - Define Your Current Situation (-You Are Here)
Trick of The Trade
It was my 7-year-old sister who taught me that money is potential power.
The medium of exchange was sweets and Jess would store her surplus.
She would always have a stash of candy, while I would instantly eat any treat.
I was eating sweets hand to mouth while my sister understood that she could store it, and later exchange her candy for favours.
I would jump at any opportunity to increase my share of sugary goodness.
My sister saw the value in converting her delectable excess of sweets into services to make me do whatever she wanted.
She had become her own bank, and I was her number one customer.
My overindulgence made me susceptible to exploitation and tooth rott.
Does Money Control You?
How does money affect your state of mind?
How does your psychology affect your transactions?
Think about your relationship with money.
We all use money in our day to day lives. But we all seem to have a different set of understanding, beliefs and preconceptions about economies, value and our ability to generate wealth.
We have hidden triggers and emotions linked to money based on our mindset, environment and upbringing.
Search for clues about your relationship with money by looking at your past spending.
Money spent is your vote for what you want.
Living Beyond your Means
People who live paycheck-to-paycheck get stuck in the “Rat Race”.
Their spending habits lock them into a vicious cycle, feeling trapped in their job or with no hope for riches.
They lose the freedom of choice and ultimately the joy and satisfaction of being in control of their time.
Working less, retiring at regular intervals throughout your life, or spending more time with your family becomes an unrealistic dream when you spend more money than you make.
What do your spending habits say about you?
Don't tell me what you value, show me your budget, and I'll tell you what you value.” -Joe Biden
In order to understand your cash flow, you need to understand what your costs are. Have a look at your bank statement and use a piece of paper, or the free tool provide to asses your costs.
Check you account to see what you are spending on in a typical month on:
1. Housing/ Rent
Use the tool to easily work out percentages and see if you can increase your Investing and saving.
Avoiding lifestyle creep will allow you to invest and save more as you earn more.
The simplest rule of finance to remember is that your costs should not outweigh your income.
Production Versus Consumption
Consider that the money you make is usually equal to the value you produce for society, while the money you spend is equal to your money habits and conditioning.
If you need to fix your finances you have two simple options.
Increase your income by creating more value.
Lower your expenses, by reducing consumption. Target the high ticket items like housing, transport, and food to get maximum rewards for effort.
It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for. -Robert Kiyosaki
Rich is not defined by how much money you spend. It is how much money you keep.
My sister was content with her lot. She always had enough candy to satisfy her and had some saved to use as portable power.
I was the one who ate all the sugar until I felt ill. My consumer habits were unhealthy. I was the one eating more sweets, but my sister was the one with the power.
She understood the value of putting some candy away and being conscious about not consuming more than she needed to.
I learned that the only way to get rich was to consume less candy than I received.
Once I understood how to consume less and live within my means, no-one can exercise power over me.
If you want to learn how I think about trading to protect my savings, you can check out this article about the best investment advice of all time.
Please use the free budgeting tool below to help you on your journey of financial literacy and share this tool with a friend or family member.