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Welcome To
The Course, Mastering Money The S.M.A.R.T Way Without Working Any Harder! Lesson
#3
MANAGE AND RESPECT YOUR MONEY
By
the end of this module, you will learn how to manage and respect your money
and make informed investment decisions to become a SMART MONEY MANAGER.
You can’t manage your finances without the
right financial information.
Managing money, like managing your household,
must be worked on throughout your life like exercise or washing. You cannot
expect to stay in shape if you only exercise once a year!
What does managing your money mean?
Managing could
be defined as control, influence or taking charge. An example of managing finances
well is having enough put aside to be able to pay your bills despite a job
loss.
Question
If you lost your
job, for how long could you manage and pay your bills?
During a financial
crisis or recession, millions of people lose their homes within months of being
made redundant.
They have no
savings. Instead, they have rent or mortgage payments, credit cards, car lease
payments and loans. In short, most people live on a knife edge and are no more
than three salary payments from bankruptcy.
Rainy-day money
You must have an
emergency contingency fund so that you are not dependant on credit cards or instant
payday loans when the car or washing machine breaks down.
Some well-known payday lenders charge as much as 91% APR
(annualised percentage rate) for small unsecured loans, according to Payday
UK’s website.
Borrowers do not
realise they are paying an annualised 91% because they are paying off the loan
in less than a year.
Payday UK quotes the
following example:
“Representative
Example: Borrow £500 for 6 months. Interest: £160.27 - Interest rate: 65% per
annum (fixed). Representative APR: 91% - Total amount payable: £660.27. Rates
between 9.3% APR and 1294% APR”.
Even high street banks are charging as much as 40% for a
temporary overdraught – 400 times the base rate!
UK base interest
rates are 0.1%, the lowest it has ever been in history.
If a lender is
charging you 3% on your mortgage, that is 40 x the 0.1% the base lending rate
on which they can borrow money from the markets and us depositors. I have never
seen such a high margin.
Mortgages used to
cost around 2% over base lending rates, so when the base rate was say 8%, you
would typically pay 10% on a mortgage – or a margin of 1.25 over base lending
rates.
Solution.
Make sure you have a
contingency fund for emergencies, so you don’t have to rely on loan sharks.
If you do need
credit, search for cheaper alternatives online or try credit unions.
You should have
reserves equivalent to 6 to 12 months’ salary in the bank in case you lose your
job or source of income. Large companies, government and local authorities hold
millions of reserves. They also have a ‘disaster recovery’ plan in place.
You cannot possibly
manage or control your finances without data, which means knowing exactly how
much money is coming in and going out.
Managers cannot
manage a company without accurate management information and your household is
no different.
Think of yourself
as a business or corporation even if you work for somebody.
You are the CEO of
your own business.
Hold monthly,
quarterly and annual board meetings with your family, even you’re the only
director!
Set up a system to
keep a track of your revenue and costs.
What does “respecting”
money mean?
Respect money and it
will respect you. The author and speaker Joe Vitale, who was featured in the
movie The Secret, advises that “money has its own psychology” and “energy”,
which you can either attract or block depending on your mindset.
Energy does not die;
it moves around and changes form. Similarly, money circulates and helps
multiple people and causes.
Think about it.
Let's say you give $10 to a friend to pay his cleaner. His cleaner then uses
the same $10 to pay for shoe repairs, the repair guy takes the same $10 to buy
lunch and coffee at Starbucks. Starbucks bank the cash. Your friend goes
into the bank to draw cash out to repay you and gets the same $10 note and
gives it back to you. How many things has that same $10 bought?
Right now there are
trillions of dollars in circulation.
Author Brian Tracy
gave me a simple idea at one of his seminars in America. The great speaker
said: “You should respect money and even look after the cash in your wallet or
purse by placing each dollar bill neatly and in order of value, with the
President’s head facing the right way”. This might sound silly, but Brian went
on to say that whenever he met someone who had money issues, their money would
be stuffed into their pocket or purse like crumpled pieces of worthless paper.
It was a metaphor for the way they treated money, and ultimately the way money
treated them.
Respecting money is
like respecting others, treating it well, nurturing it, looking after it and
always taking care of it.
I had a school
friend, Malcolm, from a well-off family who would casually throw away penny
coins from his pocket saying they were “dirty” and “worthless”.
His lack of respect
for money led to Malcolm being broke and living week-to-week for the rest of
his life - even when he was earning well.
I had a habit of
picking up “dirty” coins, which I retain to this day. The late Wayne Dyer also
picked up coins and gave thanks for the blessing of money before putting them
in a big jar.
Look after your
money and it will look after you.
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Education is key.
Lack of financial
education can be extremely costly of your lifetime.
For instance, not
understanding how high management charges on mutual funds or pension schemes
can affect the value of your portfolio – which could cost you hundreds of
thousands.
Buying a house is
probably the biggest financial transaction most people make in their lives, yet
few people understand mortgages. They borrow hundreds of thousands and sign on
the dotted line without reading the terms and conditions.
I have met extremely
intelligent academics, scientists and directors running huge companies who did
not know how to manage their personal finances and in some case made costly
financial errors or retired broke.
Finance is not
taught in schools, which is why we graduate from formal education financially
ignorant. We rely on financial advisers to tell us what to do, but where do the
advisers get their financial education? The answer is, from financial industry
led courses. Anybody can take these financial adviser courses!
Take a financial
adviser course.
You can take a basic
financial adviser course without becoming an adviser. The knowledge I gained
from the courses to become a regulated adviser have been invaluable to me
throughout my life.
The courses taught
me about saving and investing, but more importantly, borrowing money and using
the infinite benefits of leveraging 'other people's money'.
This knowledge has
literally been worth millions to me over the years.
A short home-study
financial course could be worth more in money terms than a university degree.
Never stop
learning.
The world of finance
is constantly changing and evolving. Keep yourself up-to-date by reading the
financial pages of quality newspapers and magazines online or use your local
library. It only takes a few minutes each day to scan the financial news, or an
hour at the weekend to read the money pages, but this small investment will pay
exponential dividends and perpetual returns for the rest of your life.
Summary Day 3
Managing
and respecting money, and learning about the world of finance, is a lifelong
process like looking after your health.
Action
Steps
·
Think about how you manage your money.
·
Start recording your monthly income and
expenditure.
·
Calculate how long you can survive if your
income dried up.
·
Start saving for emergencies and have a disaster
recovery plan.
·
Start building up a fund to cover 6–12 months of
essential expenditure.
·
Organise and respect your money.
·
Educate yourself in all aspects of personal
finance.
·
Take a course or read books.
·
Read the financial news.
·
Never stop learning and updating your knowledge.
Thank you for listening and congratulations on completing
this module. In the next module, we will be looking at how to accumulate
money over time.
If you would like to learn how to invest and manage your
money, become a professional property investor, and be
financially free without working any harder and spending your life exchanging
your time for money watch this free on demand training now to learn how to become financially
free without working any harder.
As
a thank you, I will give a special free gift which can help transform your
finances when you attend the online training.
Click on this
link to watch the free training now https://bit.ly/3wLWqx2
