Why How Much Money You Make Doesn't Matter

"It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for."

 - Robert Kiyosaki

Do you sometimes feel like you don't make enough? Do you sometimes think that if you just made a little bit more money you would be better off? If you answered yes to these questions or have ever thought about these questions, then you're in for a real surprise. Making more money will not solve your problems. Many times, we're stuck just getting by because of how we spend, not because of what we make.

Let me give you an example. Let's examine this person that we will call Robert. Robert works as a warehouse manager and makes about $40,000 a year. If  you break that down monthly, he makes $3,340 a month. If you look at Robert's monthly expenses, you'll see that by the end of the month, Robert has a total of $3,040 that he spends on rent, bills, shopping, gas, food, etc.

Robert, Warehouse Manager
Monthly Income: $3,340

Monthly Mortgage: $1,050
Monthly Bills: $650
Other Expenses: $1,340
Total Monthly Expenses: $3,040

By the end of the month, Robert actually has $300 left over. This is is his monthly Cash Flow. Robert can choose to put these $300 in a savings account or he might just leave it in his checking account. Regardless of what Robert decides to do, he is making more money than what he spends at the end of every month. 

Let's look at another example. If you see below, you'll see that Stephanie makes about $90,000 a year. This equates to $7,500 a month. However, if you closely examine Stephanie's expenses, you'll see that her total monthly expenses add up to $7,715. This could be due to high school loan payments, more debt, etc.

Stephanie, VP of Finance
Monthly Income: $7,500

Monthly Mortgage: $1,595
Monthly Bills: $1,080
Other Expenses: $5,040
Total Monthly Expenses: $7,715

Most people who make more money tend to also spend more money. As you see with Stephanie, at the end of the month she actually has a negative monthly Cash Flow of $215. 

If you compare Robert to Stephanie, you would think that Stephanie would be better off because she makes more than double the amount of what Robert makes, but in these examples, that isn't the case. Although Stephanie makes more money, Robert has more monthly Cash Flow than Stephanie. If you annualize these amounts, you'll see that at the end of the year, Robert will have $3,600 left over because he makes more than what he spends. However, at the end of the year, Stephanie is -$2,580, thus spending more than what she makes. This will typically lead a person like Stephanie to attain more credit and get deeper in debt.

In conclusion, you want to make sure that you have positive cash flow consistently every month. It is not uncommon to see someone who makes what Robert makes be wealthier than someone like Stephanie. 

Do you have positive cash flow coming in every month? Comment and share. 

Don't forget to share this blog so you can encourage others: family, co-workers, friends. Give them something to get motivated! You never know what they might be going through. A few words of encouragement can go a long way.

5 Easy Steps To Follow...For Those Struggling With Finances

"Too many people spend money they haven't earned to buy things they don't need, to impress people they don't like."

 - Will Smith

Some people call me the accidental Financial Planner. Well, actually, no one calls me that but I thought it was a catchy name for my informal title. Since last November, I have gladly spent numerous hours helping people trying to get their finances together. My goal has always been to help people control their expenses so they can have enough money to not worry about money. (Don't worry - I won't be disclosing any names!)

Interestingly enough, I found myself giving the same tips to different people over and over again. These tips are essentially very basic and simple and will make a huge difference with the way you handle your money. If you properly follow these 5 steps, you will learn a lot about they way you handle your money, where your money actually goes and what changes you need to make to ensure financial health for yourself and  your family. 

1. Track Your Expenses
The first question I typically ask someone when I meet with them is, "what do you spend your money on?" The most common response I get from parents is: "on the kids." However, after fully reviewing all expenditures, it always turns out that perhaps less than 15% of the total expenses are spent on the kids. Other people can't remember or don't even know how much they spent on their phone bill or that they had a gym membership. It is important for everyone to track their expenses. There are many free tools out there that will actually do this for you. Most banks have online banking but a great tool for those that might have multiple accounts, and my favorite tool, is mint.com.

2. Use Less Cash
Cash is bad for a few reasons. One reason: if you have cash, you will spend it. If you don't have cash, you won't have something to spend. Another reason cash is bad: most people who heavily use cash to make transactions, payments or to buy things don't track their expenses. Many people have the habit of cashing their paychecks or going to the ATM frequently to take out cash. Unless you are writing down why you took out $100 on July 2nd of 2014, you will never know where your money went. Use your debit card to make transactions instead so that your transaction can be tracked and you can truly find out what you're spending your money on. 

3. Tag Your Expenses
Most people are lazy. They want a program or their online banking system to track perfectly what they spent when they went to Target. I have yet to find a system that will read your mind. It's impossible for a program to know that on August 2nd, you went to Target to buy groceries and that on August 8th you went to Target to buy clothes. Most people don't want to tag the expenses appropriately. Spend two to three days a week looking at your account and making the appropriate adjustments to your transactions. 

4. Review Your Expenses
Usually, after I meet with someone for the first time to go over their finances, the individual is excited about making changes to their financial habits. They leave with a mint.com account and with some financial knowledge about where their money went. However, when we meet a month later, I ask the question, "how many times did you look at your mint.com account?" The typical answer is one to three times. If you're only looking at your bank statements or checking your budget one to three times a month, you are doomed to repeat the same financial mistakes. It's of no value if you have online banking or a program that tracks for your expenses if you're never looking at your numbers. Try looking at the numbers at least once weekly, and then get in the habit of looking at them twice a week. I personally look at my mint.com account three times a week. 

5. Create a Budget
Most people are scared of the word "budget". When I told a certain individual that we needed to get her on a budget, her response was, "A budget? A budget will just tell me that I can't spend my money!" This is actually not true. A budget is a way for your to plan how you want to spend  your money. So, if you deemed it valuable to spend your money on video games every month, then you can definitely do that as long as you create a budget and a plan to execute that budget. I personally love going to the movies so I have a budget every month allotted to going to the movies. A budget really helps you decide where you want to put your money. 

Taking control of your finances will not happen over night. This will take time and discipline. Many of us were never taught about budgets, expenses and money. I hope to educate those that might be struggling taking control of their money. Am I an expert? Absolutely not. However, those of you that know me well, also know that at one point, I was also living pay check to pay check, getting deeper in debt, having collections calling me and a law suit from a credit card company. If you're in a hole - trust me - you can get out. Anything is possible. 

Don't forget to share this blog so you can encourage others: family, co-workers, friends. Give them something to get motivated! You never know what they might be going through. A few words of encouragement can go a long way.

Are Your Habits Making You Rich Or Poor?

"Bad habits are like a comfortable bed, easy to get into but hard to get out of"-Anonymous

What did I do last week? What did I accomplish? How did I spend my time? These are questions I ask myself at the end of every week. For the last few years, I made it a habit to always evaluate my days and weeks, never keeping my eyes off of my goals and dreams. However, not everyone asks these questions on a consistent basis.

A few months ago I wrote a blog called Do You Have What It Takes To Be Wealthy?, discussing a study done about successful people. The study carefully examined the habits of successful people and it compared them to the habits of the poor. Your daily habits will determine your success in life. Thomas Corley spent five years studying the lives of both rich people (defined as having an annual income of $160,000 or more and a liquid net worth of $3.2 million or more) and those of poor people (defined as having an annual income of $35,000 or less and a liquid net worth of $5,000 or less). Below are some of the results of Corley's study.

"I maintain a daily to-do list"

• Rich people who agree: 81%
• Poor people who agree: 19%

"I love reading"

• Rich people who agree: 86%
• Poor people who agree: 26%

"I do more than my job requires"

• Rich people who agree: 81%
• Poor people who agree: 17%

"I focus on my goals every day"

• Rich people who agree: 62%
• Poor people who agree: 6%

"I watch reality shows on TV"

• Rich people who agree: 6%
• Poor people who agree: 78%

"I play the lottery regularly"

• Rich people who agree: 6%
• Poor people who agree: 77%

Next week we'll go over these results in a lot more detail. It's important to study the habits that might be keeping us from achieving some of our goals. The purpose of this study is not to come up with ways to get rich, but to compare how rich and poor spend their time and energy. Becoming rich might not be your goal, or my goal, but achieving certain financial goals, dreams, or aspirations might. 

Ask yourself these questions from the study. Which comments do you agree with? 
Share. 

Don't forget to share this blog so you can encourage others: family, co-workers, friends. Give them something to get motivated! You never know what they might be going through. A few words of encouragement can go a long way.

Do you have what it takes to be wealthy?

"We are what we repeatedly do; excellence, then, is not an act but a habit." 

- Aristotle 

I recently ran into an info graphic (see below) about the habits of the world's wealthiest people. We sometimes fool ourselves in believing that there is a "reason" why someone is rich and we're not. We convince ourselves that we can't possibly do what they did so we never try. However, one way to begin is by breaking our bad habits and creating new ones that might be closely aligned to those that are successful. 

What bad habits do you need to break? What habits of the wealthy can you incorporate immediately?