Archives For May 2011

Your money philosophy is the biggest driver of your financial future. It’s your set of financial values, beliefs and ideas that guide your daily decisions and actions.

Without the correct ‘money philosophy’ it’s easy to get lost and for a good chunk of time, specifically when I was broke after college, I didn’t control my own money philosophy.  Instead, it was controlled by banks, advertisers, products, my job – anyone who wanted a piece of my life.

I lived that way for too long – that was until I reached my breaking point.  I didn’t realize I could develop and control my OWN money philosophy. Since then, I’ve worked extensively to define my own philosophy, and made a huge effort to stick to it.

Your money philosophy should help drive decisions in your life.

What is your money philosophy? Do you use your money as a tool in your life or does your money control your actions?

Either way, if you’re unhappy with your current decisions, you can change the money philosophy that drives them!

This is not a one-size-fits all plan.

Each one of us is different, and we must recognize that when identifying and building our own money philosophies. As a matter of fact, I don’t like the systems and strategies that prescribe exactly how to get out of debt or how to become a millionaire.

What works for one person, may not work for the next. A lot of it depends on your personality type, your history and your current environment.

When you create your own money philosophy, it’s important to think long term. Don’t let the obstacles of today dictate your end goal. Don’t be afraid to dream.

What are some of the tenets of my money philosophy?

1. Control your money and yourself
2. Spend less than you make
3. Sacrifice
4. Live life like there’s no tomorrow, but plan life like there are plenty of tomorrows!
5. March to the beat of your own drum

1. Control your money and yourself

You need to develop a discipline in your life plan that you continue to live as your money situation changes. Your philosophy shouldn’t change if you get a big raise. If it does, then it wasn’t a philosophy in the first place.

Imagine changing religions every time you went to a new church.

One of the best examples of discipline in a money philosophy is Warren Buffett. He has lived in the same two story house in Omaha, Nebraska since 1957. It doesn’t matter that he’s a mega billionaire. He still controls himself.

My goal is to control me which will allow me to control my money.

If I lose control of myself, everything else will go with it. I practice discipline with my money and it’s worked out well as my wife and I have continued to make more and more.

All it takes is one bad decision to fall off the wagon.

Some people who don’t have control think they can keep up with their spending by making more money. Trying to out earn your bad money decisions is like trying to walk off your overeating.

You might be able to keep up for a while but eventually it’s going to catch up and you’re going to go broke or get fat!

A key element to my money philosophy is controlling myself which in turn controls my money.

2. Spend less than you make

This one is easy. It’s easy for a person making over $1 million a year to be poor and many of them do it. They spend more than they make.  There was a time in my life when I spent more than I made and that made me broke.

John D Rockefeller said “save when you can and not when you have to.”  The only way you can do this is to spend less than you make.

3. Sacrifice

You must be willing sacrifice to have success in your plan. It’s not just me and you who can’t have everything we want. It’s everyone!

This is the most important part of my personal money philosophy: I’m willing to sacrifice some of the creature comforts today to guarantee my comfort in life tomorrow.

I’m not willing to make myself miserable, but I’ll sacrifice.  This doesn’t mean I’m going to live a life of want and not enjoy it until I’m too old to.  My wife and I have worked hard to pay off our debts and save money to do some of the things we want to now.  For example, we went on a dream vacation to Machu Picchu in September 2010,

However, right now I’m sitting in my office with a box fan on me because the temperature inside is 77 degrees. We have central air conditioning but I’m ok without it right now.

We’re willing to sacrifice comfort today so we can do the big things we want to do.  Part of sacrificing is giving up wants and focusing on needs. As Benjamin Franklin said, “blessed is he that expects nothing, for he shall never be disappointed.”

4. Live life like there’s no tomorrow, but plan life like there are plenty of tomorrows!

Many people use the first part of the phrase to justify their poor money habits. “You can’t take it with you!” That usually translates into broke.

You don’t need to spend money to live like there’s no tomorrow.

Living like there’s no tomorrow means focusing on the good parts of life and not worrying about the bad.

We all have guilt, shame, and sorrows. Many times it takes impending death before we realize the significance of living like there’s no tomorrow.

The most important concepts in building wealth are consistent contributions and time. And TIME. Most millionaires make it through hard work and contributing to their retirement savings over TIME.

You’re going to get old someday. Do yourself a favor and starting saving money for that old man or woman you’ll one day become.

5. March to the beat of your own drum

Don’t be afraid to create your own money philosophy. Make sure you’re the one who controls your life. Don’t be afraid to be different.

Henry David Thoreau illustrates the acceptance of individuality when he wrote:

“Why should we be in such desperate haste to succeed, and in such desperate enterprise? If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away. It is not important that he should mature as soon as an apple-tree or an oak. Shall he turn his spring into summer?”

Your money philosophy should coincide with your beliefs, wants, and needs. Also, realize it might change over time as your situation changes.  Don’t be afraid to dream big and change your current money philosophy. After all, there’s a good chance you didn’t even create it!

After you create your money philosophy, you’re ready to create your life plan. Use the steps outlined in the OWN IT plan to do this.  The OWN IT plan is an actionable set of steps and the money philosophy is the tenets to live by.

Your money philosophy should feed into your OWN IT plan and vice versa. There is nothing independent in this world.  What do you think? What are the main points for your money philosophy?