Manage Your Money

by Ted Hunter
April 22, 2011

The Rules of Money, A Road Map to Financial Literacy (2 of 3)

April is Financial Literacy Month and I started the month talking about defining financial literacy and how to begin.  Then I started to talk about the money rules.  There are nine rules to the game of money that I describe in my book, Money Smart.  They are absolutely critical to your success with money and its role in your life as you work to create financial freedom.  Follow them and you will quickly see a positive change when it comes to money.  Break them often enough and you will almost certainly insure that money ends up subtracting from your happiness rather than adding to it. So here is the second of three of the nine Rules of Money that I am sharing:

Money Rule: Have a Written Financial Plan and Follow It

You must have a written financial plan that identifies what you want and how you’re going to get it. If you do not, you will have created a very high probability that you will never achieve the kind of financial freedom you desire.  Your written financial plan is the map of how you will spend and save your money and reach your destination.  Over the years, through talking and working with a lot of people about their personal money management, I have been stunned that most people do not really know where their money goes. Plus, half of the people who believe they live within their means do not. They just don’t know it. If you do nothing else, you absolutely must know how you actually spend your money and its impact on your life. Write down your plan and follow it.  My book, Money Smart, walks you step by step through the process of creating a personal money management plan that is simple to follow. All the tools you need are there and electronic versions of the worksheets and calculators are free on www.moneysmartonline.com for your convenience.

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by Ted Hunter
April 21, 2011

The Rules of Money, A Road Map to Financial Literacy (1 of 3)

April is Financial Literacy Month and in the past two blogs I’ve talked about defining financial literacy and how to begin. Now I would like to talk a little bit about the rules. There are nine rules to the game of money that I describe in my book, Money Smart. They are absolutely critical to your success with money and its role in your life. Follow them and you will quickly see a positive change when it comes to money. Break them often enough and you will almost certainly insure that money ends up subtracting from your happiness rather than adding to it. So let’s talk about the first of three of the nine Rules of Money that I will share over the next few days:

Money Rule: It Isn’t How Much You Make, But What You Do With It That Counts
There are two roads to success with money. The first is to make more money; the second is to spend more wisely. Most people focus on the first road while downplaying or outright ignoring the importance of spending wisely. However, study after study shows that for most people the overwhelming majority of financial success in their lives comes from being smart about how they spend their money. I am not suggesting that you don’t try to make more money or that you live like a pauper. I’m just asking you to recognize which purchases or expenses will really end up adding to your happiness in the long run, and which will not. I’m asking you to be reflective about your spending and make smart spending choices. If you do that and spend your money wisely, it will pretty much insure you will end up being financially successful. If you make a lot more money in the future, that’s great, but the second road, spending wisely, is pretty much a sure thing if you work at it.

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by Ted Hunter
April 14, 2011

Where to Start… April Is Financial Literacy Month

April is Financial Literacy Month. What does that mean exactly? Financial Literacy is about having the information to make informed and effective decisions about your money. Are you financially literate? And if, like most Americans you’re not as literate as you’d like to be, where do you begin?

The first step to financial literacy is to be honest about the way you have been spending money. Studies have shown that over 50% of American adults do not know where their money goes, though they think they do. Do you know where you money goes? If you don’t, you should write down every single expenditure for thirty days. I think you will be amazed and enlightened to see where all your hard earned money goes. It’s a simple exercise, a great eye-opener. and a great first step.

Another way to get honest about your finances is figuring out your net worth. You should know and track your net worth. Your net worth is the difference between what you own and what you owe. We have a net worth calculator that is very easy to use. Knowing your net worth is an important step when setting financial goals and provides a point of comparison as you move forward.

Once you have looked honestly at your finances, tracked your spending, and know your net worth, the next step in your quest for financial literacy is educating yourself on all the basics. Fill in the gaps in your education so you can be truly successful with money. Personal money management isn’t complicated. Everyone has the ability to take full control of every aspect of their personal finances. Money Smart provides that education and has the tools you need to begin. So begin. Start this month. Learn what you need to know, and then trust yourself. The truth is that everyone has the ability to become financially literate, control their personal finances and create abundance.

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by Ted Hunter
April 12, 2011

Financial Literacy Month? Why America Needs a Finance Class

Raise your hand if you know that April is financial literacy month. While financial literacy may not be glamorous or popular, (you can put your hands down now) I think it is needed and necessary. Most American’s could use a finance class. I’m talking about a complete fundamental financial education, without distracting and unnecessary details that most so-called financial experts try to convince you that you need to understand finance. You don’t. Money management isn’t complicated. I wrote Money Smart with this in mind.

Fifty years ago, personal money management was a fairly simple thing. People cashed their paychecks every Friday and set aside the cash needed for the upcoming week. If you wanted to buy something, you saved for it. Most workers didn’t have to save for retirement, as the company they spent most of their lives working for provided an adequate pension plan.

Since then, the incredible growth of middle-class affluence, the introduction of the 401K, and a multitude of new borrowing options including the credit card have brought financial complexities that most people still do not fully understand. Some people choose to turn over a majority of their key financial decisions to so-called financial experts and others don’t, but either way many still lack a fundamental understanding of what they are doing with their money.

That lack of understanding and control of their finances costs many families a lot. 9 million families and counting have now lost their homes, over 10 million baby boomers can’t retire, 60% of Americans now live paycheck to paycheck, and money is the #1 source of unhappiness in our society these days.

Financial experts and financial media have perpetuated a damaging myth that personal money management is very complicated. The truth is that it is not. Smart money management is something almost anyone can do, provided it’s explained properly. That’s why I spent several years of my life writing Money Smart. To me, the choice is very clear. Take charge of your money. Learn what you need to know, and then trust yourself. Financial Literacy Month is the perfect time to start.

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by Ted Hunter
April 1, 2011

Don’t Be an April Fool About Finances – Three Money Myths

Happy April Fool’s Day.  This holiday got me thinking about how Americans have been fooled into thinking they can’t handle their finances. It’s just not true and that’s one of the reasons I wrote Money Smart.

Over the last forty years, the large and lucrative financial industry has convinced the public that they need to hire someone to help with their personal finances. Financial service experts are trained in and excel at sales and marketing, asset gathering, and commission generation, but not much else. It’s a myth that consumers cannot handle their own finances. The truth is that with a little understanding of the basics of finance, pretty much everyone can manage their money and do it better than an ‘expert’ is likely to.

Let’s break down the Three Myths of Money Management:

Myth #1: Always Invest for the Long Term

The standard advice of the financial service industry is that the markets will always do well over the long run: therefore, so will your money.  The truth is that all markets go through long periods of substantial over- and under-pricing, creating long periods of time when you are pretty much guaranteed to make money, and others when you are pretty much guaranteed to lose.

When the stock market is significantly over-priced, the sensible thing is to sell your holdings and invest in other markets like fixed-income or real estate. If this is pointed out to people in the industry, the universal response is that nobody can time the stock market. They’re right. Nobody can, but they can sure tell when a market is significantly overpriced, and ignoring that reality usually guarantees bad results.

Myth #2: Let Us Handle Your Finances Because We Do It Better Than You Can

American’s finances were hit hard over the last ten years.  The “experts” in the financial services industry did not predict or protect their clients from the events that unfolded in the stock and real estate markets.   On the contrary, their failure to understand and act on the market forces at play made things worse for their clientele.

Myth #3: Money Management is Very Complicated

Over and over again the public has been told that money is a very complex subject and that you must have a huge amount of information to succeed financially. Again this is just not true.  There is no reason why you can’t understand the subject of personal finance and investing, all you have to do is invest very modest amount of time to learn the basics of finance.

Don’t be Fooled–Break away from these destructive financial myths. Embrace the idea that you can manage your own finances.

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