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Monday, June 5, 2023

How to Use Personal Finance Management to Achieve Your Dreams

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Personal finances appear in conversations all around us. The art of personal finance management is often left for a more personal discussion and isn’t as public. In a world where money seems to be king, it is only fair for us as humans to dream big and then be disappointed when we realize that to achieve our dreams always requires money. Then we turn to our media outlets and hear or read stories about people that “lucked into money” or “cheated a system” and somehow walked away with more than they started with. While I will be the first to admit that money can be lucked into, I also know that in order to take the chances required to let luck help you win, you have to have good personal finance management already in place to make these moves.

I am not talking about winning the lottery or being the right caller on a radio show. Those are pure luck and your chances of winning are low. However, if you strike big in one of those, then good for you! I am talking about something bigger. Making a move in your personal finances that allows money to flow to you better than it flows away from you. Just taking the time to learn how to make a monthly budget and then use that to guide your personal finances is the first step to opening the door to success.

When you take control of your personal finances you start to command your budget and tell your money what to do for you. It becomes your employee. Every dollar can have a different job. You can have a group of your employees work at one company, while another group of your dollars goes and works in real estate. What I am referring to is passive income.

In personal finance management you first learn the basics:

  • Track your income
  • Track your Debt and Expenses
  • Save Money
  • Don’t let your Debt and Expenses be larger than your income

Once you pass that level of getting your personal budgeting setup, you move onto the phase of managing your finances. Here are some key things to remember about each dollar:

  • Each dollar you earn is another potential source of income for you
  • Each dollar spent on regular expenses or debts is a source of income you have let go
  • Each dollar saved can be a different type of income
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In summary, as you earn each dollar you have now gained another personal employee. That employee works and grows its value until you have another employee that you can deploy on the same project or a different one.

As you look at personal finance management, be sure to have a plan for what you will do with each dollar and how you personally will deploy it. This is something you need to decide for yourself on how you plan to execute your own financial strategy.

I have been very clear above that dollar spent on debt and expenses are no longer able to work for you. This fact can drive some people crazy. Be sure to take a step back and realize that life isn’t lived unless you have expenses. We need to eat, live somewhere, socialize, and have fun. It can’t all be saved. Nor would I tell you to do that. You can still make decisions as to how important those expenses are to you. For example, when you go out to eat, do you really need to get a drink and dessert? Maybe at this restaurant, they have a specialty drink or dessert, in which case, go right ahead if that is what you are there for! Otherwise, think about it. Does it really change your life? Or could you deploy that dollar differently?

As you earn, spend, and save thinking ahead to your passive income and future lifestyle can be helpful. Keep living in the moment as well and make the best decisions you possibly can. Within personal finance management my most important advice is always this:

“Every dollar should fill a need, increase your happiness, or increase your wealth. If it isn’t doing one of those things, you spent it wrong.”

Bought a new computer? It should make you happy. Buying a new house? It gives you shelter. Buying a bigger house than you need? It gives you shelter and should bring you as much happiness as you put wealth into it. Bought stock in a company? It should increase your wealth and holdings.

Personal finance management is simply taking control over your finances and making sure that you are deploying your hard-earned money in ways that you approve of. Far too often we spend without considering what it is doing for us, and when we look at our bank account we simply wonder, “Where did it all go?” instead of thinking, “I know where it is, it is out working to achieve my dreams.”

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