Take Control of your finances
Never spend your money until you’ve earned it, and never invest your money until you’ve researched it. Being great at money management takes a different set of skills to making it.
Making it requires taking risks, managing it requires reducing risk. Making money takes spending money, managing money requires investing it. It is not about timing the market, but time in the market. Making money requires aggressive growth, managing money requires a more cautious, defensive and long term approach.
Probably the single biggest thing that erodes wealth is bad, out of control or extreme (volatile) money emotions. Warren Buffett said ‘If you cannot control your emotions, you cannot control your money’. To learn more behind the mindset of money check out this guide here.
Here are 12 ways to become a GREAT at Money Management and master your money, starting with:
1. Extreme emotions, good & bad, erode wealth; manage money logically
Highs and lows and the regularity of them and extremity between them are one of the best ways to mismanage all your money. Never spend or make important money decisions when you are either elated or depressed. I’ve made some bad money decisions when horny too, haha. That’s for another book in the future called ‘Wife Leverage’.
Always look to be in a regulated, controlled and balanced emotional state when making bigger, important money decisions. Take a step back and do a little research (unless you do this all the time and procrastinate in which case you need to do the opposite).
2. Sunk cost fallacy and chasing losses
This is what’s known as ‘throwing good money after bad’. Like a gambler who keeps going for that one big win and loses all their money along the way. You will win some and you will lose some. You earn or you learn. Get the lesson quick, see it as your ‘cost of entry’ or ‘entrance fee’ of education and do not chase the losses. Also, make sure you write off your losses against tax so you can end up saving half of them.
3. Going broke tryna look rich
I’m not sure exactly what emotion this falls under: Envy? Pride? But spending money you do not have to impress people you do not know, or even like, is dumb, and a very fast and sure way to go broke. Far better to make some sacrifices now so you can spend the recurring income from assets and liabilities later.
Also, look inside and ask yourself why you need to impress these people. Many people are spending money trying to fill voids in their soul that are unfillable. Like a black hole. Look to feel better about yourself and it will benefit your wealth, because instead of wasting money to fill a void in your soul, your cup will already be full.
These people don’t care about you anyway. Or at the very least they are far too busy worrying about their own problems to notice your car or house or whatever.
And what other people think about you is none of your business anyway. Next, there’s nothing to see here. These aren’t the droids you’re looking for.
4. Fear
Fear sells. We pay fast and hard to alleviate pain. The worse the pain, the more we will spend. Try to manage and allay your fears first before you spend a truck load of money. Try to contextualize the fear, put it into context. Do you really need to insure every single thing you own? Is the doomsday apocalypse really upon us? Will you really die if…
5. Guilt & shame
Anything you don’t own, owns you. If you hold guilt, you might end up spending or giving away money on repeat, trying to fill the void of guilt, often going as far back as early childhood. It is the same with shame, you may keep spending money to cover up your shame. The thing with this is, the money keeps going away but the guilt and shame do not, unless you address them.
Forgive yourself and others.
Let go of the baggage you are holding from the past. Or at least use it as leverage to go and be successful. Turn the pain into gain. Know that nature is far more intelligent than Homo Sapiens and that it has a bigger plan for you. You were meant to fail small so you could succeed big. Let go of what was. Embrace what is. Have faith in what will be.
6. Never spend more than you earn
Never. Spend. More. Than. You. Earn.
Ever.
Rule no.1. Never lose money
Rule No. 2. Don’t forget rule no.1.
7. Save an ever increasing target % of your income & increase it over time
Maybe when you’re broke, you can save up to 5% of what you earn. How you do anything is how you do everything, so to start with the amount matters not, it matters that you start. Over time the 5% becomes 10%, 20%. Once you hit 30% to 50% you are well on your way to wealth. It takes discipline and requires you to create a budget at first, but it can become a habit.
In order to execute number 6 and 7 effectively, you need to know exactly, and I mean exactly, where you are spending and ‘wasting’ your money. The best way to do this is by spending 30 to 90 days tracing every single pound and pence, dollar and cents that you spend. This will help you create a budget (no.11.).
There are the big main areas such as rent, new car, holidays, and then there are the convenient ‘lifestyle creep’ areas; small-big areas where spending can build up in a surprising way. For example, food and drink. Just 2x Costa Coffees a day with fancy milk and an extra shot is £1,715.50 a year! 3x takeaway a week for a family of four can cost you an extra £7,800 a year! Fuel, travel, new clothes, expensive hobbies, peak time activities and purchases; these can all build up.
I’ll include off peak and bulk buying, second hand (lowest point on the depreciation curve) value, price comparison patience, negotiating on price and quality over quantity.
8. Max out your ISA every year (& other tax-free savings/investments/allowances)
Depending on your location around the world, there may be tax breaks on savings and investments.
Utilise all of these that you can, as they are becoming as extinct as the Dodo. Check the savings and investment allowances here and utilise them all, targeting to max them out each year.
9. Invest in assets that pay recurring/passive income
You invest that money earned back into assets.
The compounded difference between investing in depreciating and money draining liabilities vs. income producing assets is significant, and it exaggerates over time with compounding.
Just a one degree change in direction will put you a mile off course every sixty miles. Imagine how far apart the upward and downward trajectories become over time; comparing income producing assets with profits reinvested vs. depreciating liabilities that cost money.
10. Follow the 6 levels of saving money (Get out of debt, Save Money, Invest, Speculate, Diversify & Insure in that order)
11. Create a budget
Before the next month, set targets and parameters for how much you will spend, save and invest for the next month. As you get better with money, build wealth and form a company you will do this quarterly, then yearly. To find out more about how to save money, check my latest guide here.
I don’t want to go over every small saving of gadgets and clothes. However, post lockdown when the cost of living went mad and people started to struggle, I did create a digital financial toolkit, going over dozens of ways to save money, create a budget and also sharing the best types of business models. It is my intention to keep this updated, and you can get it as a thank you from me, here
12. Turn addiction into income (or at least minimise the loss/cost)
I’m just going to tell you straight, I love spending money. Insert drool emoji. I’d even go as far as to say it is a bit of an addiction. I love a new car, new watch or nice piece of McQueen or Louboutin. The problem is that 95% of things you buy go down in value, so spending addictions on depreciating material items is a fast way to go and stay broke.
If you’re a business owner, this is a great resource (5 Essential Money Management Tips For Every Business Owner).
If you want to learn more and deep dive further into how to manage your money, you need to get a copy of my brand new book, Money Matrix: Beat The Money System & Build Generational Wealth.
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Want to know how?
Simply register for an advanced copy of my book by clicking here now.
Do you want to learn how to further make, manage and multiply your money?
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