With the holidays coming some of you may be worried about the money factor. So many gifts to buy, big meals to plan and outfits for the festivities just adds to the stress of the season. If you don’t worry about the expenses or at least plan them out, you run the risk of maxing out your credit cards and then dealing with the shock in January.
I was recently re-reading one of my favorite books, Simple Abundance by Sarah Ban Breathnach and she reminded me of another book with great advice: The Richest Man in Babylon by George S. Clason. So I want to share with you some solid advice on how to think about and manage your money, not just at the holiday time but all year and life long. I also believe that passing this wisdom on to your children is a smart way to teach them to live within their means and save for the future.
Clason’s principles of wealth are:
- Regular saving and sharing – taking what you earn and keep 10% for yourself and giving 10% to charity. The other 80% use to pay your bills
- Controlling expenditures – these are the bills. Make sure they are no more than 80% of your income. Keep a household budget and review it annually to see where you can make cuts if necessary.
- Living debt-free – some debt is fine and necessary like a mortgage or student loans for college. Make sure that you get the lowest interest rate and are able to make the monthly payment so that the debt will go away in a limited amount of time.
- Increasing prosperity through prudent investment – Think about your ROI (return on investment) for every major purchase. I recently heard a schoolteacher say that if he had thought it through, he wouldn’t have taken on so much college debt to go to his dream school only to get out and make a teacher’s salary. Many kids today take on $200,000 worth of college debt or more without calculating how long that will take to pay off. A state school at $6-10,000 a year may allow them to get the same job. My advice: do the math with your child before they enroll in college.
- Protecting the bulk of your wealth from loss – safe, not risky investments or bank accounts.
- Owning property – it’s the one thing that typically appreciates over time, you just have to buy low and sell high
- Establishing a future income for old age – Think about it in your twenties and start saving/planning. Most of us can’t count on pensions or social security, so have a plan and then a plan B.
- Increasing the ability to earn money through perseverance – This could start with a part time job in high school and lead to multiple avenues of income as an adult. When you make a job move, look for higher hourly rates, or more consistent hours or cheaper associated job expenses to keep more money flowing your way. Look for opportunities for passive income.
And finally, there is one other concept that George Clason talks about: the money magnet. I like this one because it’s kind of “woo woo” but I’ve seen it work. Keep a hundred dollar bill tucked away in your wallet to attract more money. It’s based on the law of attraction and helps you live with a feeling of abundance instead of scarcity. You can also examine your bank accounts monthly to appreciate how much you have. And if you are not happy with the bottom line, cross it out and write a number that makes you happy. Focus on that and next month, see if you get there.
What do you do to have a good relationship with money? Leave a comment.