How Should I Handle My Money?

What money, you ask?

Although times are a bit tough right now, it has not always been that way nor will it continue to be. Everything has a cycle if you look at the numbers over a period of time. Various sectors of the economy move up and down like the tides. Nothing is static. Sometimes the cycles are complimentary, one moving up as another moves down. Some are linked and as one falls, so does its companion. Being aware of these cycles can be useful.

Your financial life is not a simple thing. Nothing is cast in stone and there are quite a few variables that determine how you should handle it. For some, their income is not all that predictable, such as those that are self-employed. Others, as long as they actually have a job (not a sure thing these days), can be pretty sure about the amount of money to expect each month.

The Five Areas of Personal Finance

• Cash Flow
• Proper Protection
• Debt Management
• Emergency Fund
• Asset Accumulation & Preservation

Let me address the "Cash Flow" part first. (part one of five)

How and where does your income come from? Is is stable and predictable? Is it enough? (Too much month left at the end of the money?) How do you manage expenses. Do you need to earn additional income? Do you follow a budget or track expenses?

The first step in good financial management is to be brutally honest with yourself and actually KNOW how much you really bring in each month from all sources and where it really goes. This is one of the weakest areas for most of us. A few weeks into the month and we are asking "Where the hell did it all go?" There are numerous ways to track this available for free in most cases. From something as simple as a $.50 pocket notebook in which you write down every penny you spend on anything to freeware programs for your Smart Phone and computer. Whether you use a pencil and paper or a spreadsheet, the point is, JUST DO IT!

If you really do this, you will soon spot the "leaks" in your cash flow. Now you will see areas that can be evaluated as to just how important the expense is in relation to your overall financial health.

Not enough money left to pay all the expenses? You have two choices here, cut expenses or make more money. In many cases, spending a few dollars here and there can be trimmed or eliminated with little loss of "life style". Are you spending $3-$5 every day in that coffee house? Did you know that you can get a 24 oz. coffee for only $.89 at 7-11 or Circle K or whatever local convenience chain is near you if you bring your own cup? Or even better, make your own at home and bring it with you. Still smoking? There is $250 or more per month. Damn! That's a car payment! Or that could buy you a $250,000 Life Insurance policy or fund an Annuity policy for retirement or for college tuition that has huge tax advantages! Basically, you can "find" extra money if you look for it without changing your quality of life and it may even improve it.

Next time: Proper Protection