Learning to control money is extremely important and a whole section of this site, Take Control of Your Money, is devoted to the practical methods that make it possible. But there are some money basics to consider in the way we manage money once we are in control if our goal is to be successful with money.
In this article I will not explain how to get in control of your money. Read the section about control, mentioned above, to learn how to do that. In this article we are going to examine what must be controlled and to what end.
Controlling Money Is Not an Option
There are five primary goals which we set out to help you reach through this program for success with money. These are outlined on the introductory page of our web site:
- Take CONTROL of your financial life
- Eliminate all debts, especially credit card debt
- Increase Income
- Increase savings and investments
- Experience REAL financial independence
At this point we want to focus on a principle that relates the first of these to some of the others. Now as I might have written in my college days, this step is the sine qua non of financial success. But in case your Latin is a little rusty (and I’ve just about exhausted mine there) we will restate it this way. Without this, nothing else matters.
In short, if you don’t get in control of your money, and use it properly to your advantage, you don’t have a chance to be successful financially.
The basic principle is stated in the third law of money, The Law Of Control.
While each of us has a potential to live prosperously in constructive control of our financial affairs, this potential becomes a reality only when we live in harmony with proven principles of financial success.
It is amazing how people who are perfectly sensible when thinking about most other subjects become incredibly irrational when thinking about money.
- They know that if they want to be an author they have to write.
- They know that if they want to be a musician they have to practice.
- They know that if they want to swim they must get into the water.
But when it comes to money they seem to think they can avoid the most obvious steps to financial success, steps easily observed in every single person who does well financially.
Purposefully Control Money
Let’s get real about financial success. Money behaves in very rational ways. If we want to become one of the prosperous, financially independent people in our society, we must get in control of our money and then use our control of money to live in harmony with three known money basics.
Obviously I could say that all of the things I write about on this site, especially all the truths expressed in the ten laws of money, are essential principles to live by for success with money. And this is generally true. However, these three particular practices stand out from all the others when it comes controlling money: money consciousness, living on less than you make, and saving money.
These three practices are so powerful that I think I can safely say that without them success is impossible and with them success is almost inevitable.
In truth, these three practices are so powerful that I think I can safely say that without them success is impossible and with them success is almost inevitable. The best way you can guarantee your financial success today is to make a personal commitment to take control of your money and then find your own personal way to implement these three practices.
Money Control Basics #1:
Putting Your Mind to Work
First, learn to practice money consciousness. Notice, I did not say “prosperity consciousness.” While that is an interesting topic, here I am talking about something entirely different. Money consciousness means simply that we are always aware of the financial implications of any decision we make.
Let me emphasize that this is not a negative or unpleasant thing to do. I draw attention to this because the first reaction I have gotten from some people is that this is just that, that it puts a damper on everything.
The usual comment people make is, “I just don’t want to have to think about money every time I do something.” But this kind of thinking lacks understanding of the concept and reflects an unhealthy rather than a positive attitude about dealing with money in general.
Compare the practice of money consciousness to clothes consciousness. No matter what you do or where you go you are always aware of your clothes. With every activity you choose, you also make a conscious decision about the clothes you will wear.
To exercise you put on your sweats, or shorts depending on conditions. To attend a funeral you choose dark dress clothes. To swim you wear your swimming suit. To attend a wedding…well, you get the picture. And you never say, “When I have to decide what to wear every time, it takes all the fun out of going. I’m just not going to go anywhere again.”
It should be a routine matter (neither pleasant nor unpleasant) to consider the cost of every activity in which you engage.
It should be no different with financial considerations. It should be a routine matter (neither pleasant nor unpleasant) to consider the cost of every activity in which you engage.
If you are going out to eat it should be routine to consider comparative costs in choosing a restaurant and even more important, how much you have available to spend. It should be automatic to consider where to buy new clothes based on how expensive the store is to shop in and how much you can afford at the time.
To control money intelligently it is essential that one of your options is always to decide that it would not be wise to buy at this time because the funds are not available. At other times you can choose to wait until next month or next year, when the money will be there. Just never decide to spend when you cannot do so and stay within your available funds.
No matter what you do, considering cost should be routine, automatic, and natural in making every decision, every day, whether it be a small or large expense, even if it is one of those happy situations when you can say it has no monetary cost at all.
Above all else money management should be a positive, affirming experience. And it will be, like all the other actions I am telling you about, when it is seen as a productive part of achieving overall success with your money.
Money Control Basics #2:
Live on Less than You Make
Second, learn to live on less than you make. How obvious can it get? If we spend more than we earn we are doomed to failure, no matter how much we make.
There is much to be said for earning more money. If you are not getting ahead it is perfectly reasonable to think that earning more is at least part of the solution. Go for it! I highly recommend it. But the fact is, if you spend more than you make now you will likely spend more than you make when you earn twice as much, three times as much, or even more.
Learning to live on less than you make requires first that we learn to control money, then make a real decision to do so. In fact, this is probably the most critical part of money success.
If we are not now making the progress toward success with money we should be it is because we have never decided to do so. And first of all we have not made a true commitment to live on less than we earn.
It is easy to come up with a thousand reasons for our financial failures, but the truth is that if we are not now making the progress toward success with money we should be it is because we have never decided to do so. And first of all we have not made a true commitment to live on less than we earn.
But in order to follow through on this commitment it is necessary to develop some specific skills that are totally new to many of our generation. It is necessary to learn how to dispense our money in some controlled fashion.
Years ago it was common for folks to cash their paychecks and then divide the money into envelopes, each one designated for a particular obligation: rent or house payment, food, car payment, utilities, and the like. It worked.
Our methods may be different. We may use checking accounts or even computer programs. Or maybe not. But every family and/or individual needs to find some way to dispense their money so that only so much is made available for spending. When the assigned amount is gone the spending stops.
Money Control Basics #3:
The Opposite to Spending Is…
Third, learn to save. W. Clement Stone, one of the early leaders in the field of personal development, once stated it so clearly and forcefully you will see him quoted often even today, “If you cannot save money, then the seeds of greatness are not in you.”
If you want to do the right thing here you will have to buck the trend. Not only has savings been declining in the United States, beginning in January 2006 Americans dropped into a negative savings pattern for the first time since the Great Depression more than seventy years ago! In other words, people now withdraw more than they add to their savings. Or at least they did until the recent financial crisis.
It doesn’t have to be that way. In fact in some countries savings rates are very high. The Japanese savings rate of 28% in 2004 sounds incredible to most Americans. Not long ago I read a newspaper article cajoling people in one country to spend more because they saved so much they would have more to live on after they retired than before. In short they were unnecessarily saving too much!
Saving ten percent of earnings should be the minimum acceptable standard; if you once decide that you will do it whether it is practical or not you will find that you can.
There is a traditional piece of financial advice you will find almost everywhere: save ten percent of your income. This is a reasonable goal; saving ten percent of earnings should be the minimum acceptable standard.
But is it practical? You may not think so, but if you once decide that you will do it whether it is practical or not you will find that you can.
Here is a painless, more or less, way to implement this practice. This month save one percent of your income. That should be easy. Make sure that it is set aside for permanent savings, never to be touched. Then, next month save two percent. Then three. Keep on increasing one percent each month until you reach ten percent.
If necessary, but only if really necessary, go two or three months at each level. You will be amazed at how easily you adjust as you go along. But only if you think as if you have no option. You must begin making your savings payment just as you do your house payment. You must consider it a necessity.
Once I received a bank advertisement with a great heading. It said, “Money in the bank changes everything.” When you start having money instead of owing money your life will change so much you will be amazed. And the best part will not be all the fantastic opportunities you can take advantage of financially. It will be the way you feel about your life.
Manage Your Money for Success
Here in summary are the three essential practices needed to so control money that you achieve the money basics for financial success:
- Learn to practice money consciousness.
- Learn to live on less than you make.
- Learn to save money.
Learn these skills and you will manage money so that financial success will be virtually assured. Good success.