3 Simple Steps to Manage Your Finances

This blog was posted in The Expat Go website last April 28, 2017  but here is the original unedited version of that blog:)

How to Manage your Money: Tips for Expats from a Chartered Accountant

What is the right way to manage your money?

Managing finances is one of the most important, most difficult and challenging tasks of all.  When you get it right,  you can be free for life but when you do it wrong, you always need to work for those who are managing it right.

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I am a chartered accountant (also called certified public accountant in some countries) so managing finances should have been a no brainer for me but I learned my lessons well when my debts accumulated at the age of 26.

Now, at the age of 37, I am financially free . Happy to share these 3 simple steps to manage your finances.

  1. Review and get the right beliefs  about  money

The first step to managing your finances is by reviewing your beliefs about money .

Do you control money or does money control you? The reality is that you can only manage your money if you are in control of your money. The universal principle is that until you know how to handle what you’ve got, you won’t get any more. Remember that it is not when you have plenty of money that you can begin to manage it. It is quite the reverse – when you begin to manage your money,  you will have plenty of it.

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Why do your work to earn money? Broke people work to pay for their current lifestyle but rich people work to earn money and to create multiple income streams to become financially free. As Warren Buffet said “ If you don’t find a way to make money while you sleep, you will work until you die.” Remember to earn money and make it work hard for you by creating multiple passive income streams through business income and investment income from properties, royalties, stocks, bonds,and other investments that can make your money grow.

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  1. Know your limits and set your goals

The second step is to know your limits and set your goals.

How much is your monthly income and  expenses? Clarity is power and getting a clear picture of your monthly cash balance can help you.

If you are in a negative position where your expenses are higher than your income, then you should review your BIG expenses and identify your needs and wants.  Start cutting your expenses by spending only on things that you need.  If cutting on expenses is not easy, then finding other sources of income is another alternative.

wants and needs

How much is your current income?How much money do you need to live your desired lifestyle?  It is not your earnings that will make you rich but it is defined by your money habits. Define how much income you have , calculate how much money you need to live your desired lifestyle and identify the money habits that you need to adapt to win the money game. Remember that you can only win the money game and be  free if your passive income is higher than the cost of your lifestyle and if you adapt and model money habits of rich and successful people.

3.  Plan and prioritize your spending

The most important part in managing your money is by creating a plan of how to spend it because if you fail to plan then you are planning to fail.

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The most effective method is to put your money into 6 different F funds as follows:

  • Fundamentals – money allocated for the things that you and your family need in order to live such as food, water, transportation, housing, etc.
  • Freedom – money allocated  for investments to multiply and grow your money
  • Fun – money to pamper and reward yourself like expenses for spa, dinner dates, etc.
  • Forever learning – money allocated for further education to equip and improve yourself to make the right life and investment decisions
  • Feel Good – money allocated for emergencies and big spending like smart TVs, out of country trips, etc.
  • Fellowship – money allocated to support your community,  church or any charity

There is no right or wrong formula in terms of how much percentage you should allocate for each fund but based on the recent training I attended from the millionaire mind intensive training , the recommended percentages are as follows:

  • 55% for fundamentals
  • 10% for freedom
  • 10% for fun
  • 10% forever learning 
  • 10% for feel good and
  • 5% for fellowship

If you seriously want to manage your finances, make a choice and take a commitment to rule over money. Simplify, save as much as you can, plan carefully and find ways to make money work hard for you.

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P.S.

If you want to manage your finances well, learn the easiest and most effective money management method through one of the life changing trainings I ever attended – Millionaire mind intensive. Catch them at the following countries, bUy your tickets now before it gets sold out!

Bangalore (Apr21-23) – https://goo.gl/zGFHtj
Hyderabad (May19-21) – https://goo.gl/OMbRrj
Chenna (Jun30-Jul2) – https://goo.gl/ZpioVC
Dublin (Jun9-11) – https://en.xing-events.com/e/xipiue
South Africa (Jun9-11) – https://en.xing-events.com/e/gacodd
Malaysia (Sep29-Oct1) – https://en.xing-events.com/e/seaazo