My Favorite Money Management System

Last Updated on 2014-11-15 by Kassandra

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So … I love learning about money.
How I can make it work for me.
How I can increase my income streams.

And why is that?

“Money and success don’t change people;
They merely amplify what is already there.”

Will Smith

And I know that the more money I have … the more money I have available … the more GOOD I can do in the world because I’ll have the resources to do more of what’s in my heart to help others.

WHAT??!? BUT MONEY IS THE ROOT OF ALL EVIL!

 

No, the LOVE of money is the root of all evil.
I don’t love money … I love what I can do for people when I have it.

Now – one of my favorite ways of “creating wealth” as it were is the money management system I learned through the “Secrets of the Millionare Mind” book (as well as the Millionaire Mind Intensive) from T Harv Eker.

The first thing you’ve got to do is determine what kind of person you are! Do you like to hoarde your money for a “rainy day”? Do you spend it at a moment’s notice because it makes you feel good? Do you give it all away and have nothing left for yourself?

After that it’s an easy numbers game! Basically no matter what income you bring in (regular income, interest, birthday card money, money off the street, etc) you will split it up in this way:

• 50% to Bills
• 10% to Fun
• 10% to Giving (GIV)
• 10% to Education (EDU)
• 10% to Long Term Savings For Spending (LTSS)
• 10% to Financial Freedom Account (FFA)

Now with the knowledge of what kind of money person you are, you can then adjust these percentages accordingly.

ALWAYS be sure you can pay your bills! I know that some money books teach you alternative ways of thinking on that … but unless you are putting money into assets that will provide additional income streams OR have multiple streams of residual income coming in already, I would personally advise against moving with that way of thinking. But then again I’m also currently in the wrong money quadrant (which I’ll explain another time).

Anyway!

The gist of it is that if you tend to spend a bit more frivolously, then you would have a smaller percentage in the FUN category and more in the LTSS category, per say. Or even the FFA!

Or perhaps you tend to hoard your money … then you should decrease your LTSS and increase your FUN!

Here’s why …

Bills – you need to ensure all of your monthly bills are covered. This includes but is not limited to:

• rent
• electricity
• telephone
• loan payments
• car payments
• groceries
• {insert things you need to live with and/or pay off minimally monthly)

Fun – this MUST be spent EVERY month! Things you enjoy, which could be including but not limited to:

• painting parties
• paintball
• gaming items
• non-personal development books & materials
• trips

Giving – they teach you that this is supposed to be a “greater good” type thing … I personally use it to donate to certain charities that interest me. However, this has also been a wonderful source for me to be able to come through and simply give a chunk and help someone out without it being a financial burden on myself.

[Keep in mind the giving portion is not intended to go below 5%]

Education – this is for your improvement. It can be something for your job, your business … but it’s mostly for PERSONAL DEVELOPMENT. This include things like:

• Zig Ziglar
• Tony Robbins
• Brian Tracy
• Napoleon Hill

“Work hard at your job and you can make a living. Work hard on yourself and you can make a fortune.” – Jim Rohn

Long Term Savings For Spending – this is for things like:

• house
• car
• vacation

Financial Freedom Account – this is not meant to be used for ANYTHING except to ensure your financial freedom. This can be used for things like:

• 401K
• ROTH IRA
• Annuity Fund
• Stocks

However I am currently using this to pay off all of my “bad debt” so that I no longer have “bad debt” and can focus on “good debt” [another day, another blog].

So let’s just take an example and break it down into actual numbers.

Let’s say you make $15 an hour and you have 25% taken out for taxes (I always use that number because for my current tax bracket, I have at least 23% taken out in taxes … that and I like even numbers.)

That means if you work 40 hours a week, you make $600/week pre-tax …
Or $450/week after tax ($150 taken for taxes to pay for government funded anything).

That’s on average $2,426.67 a month pre-tax …
Or $1,820 a month after tax …

Let’s put those percentages to use!

Bills = (1820*.50) = 910
Fun = (1820*.10) = 182
Giving = (1820*.10) = 182
Education = (1820*.10) = 182
LTSS = (1820*.10) = 182
FFA = (1820*.10) = 182

So based on these percentages, you have $910 a month to put towards all of your bills, and the rest is split up to meet your other needs.

Keep in mind that this is using an UNUSUALLY HIGH tax bracket for most people, so you’d actually have more than that, but at least you now get the picture.

Now, there are ways to reduce the amount of taxes you give, but that will be for a blog another time.

And that’s basically it!

I have also created an Excel document for you to download and use to tweak the percentages and amount of income to what suits your situation. This is but one formula (albeit one of the best ones) to start taking back your financial life.

>> Click here for the FREE downloadable tool! <<

But remember … you must be vigilant and diligent when starting any money management system. You must have self discipline. ESPECIALLY if you have debt you’re trying to get rid of. (I’ll also make another blog with ideas on how to decrease your debt more rapidly.)

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Thanks so much for being here with me again. I look forward to continuing to provide you with more hints, tips, tricks, ideas, etc that may help you life a more prosperous life.

~ To Your Success ~
Kassandra