Bring Practicality Back to Personal Finance

The #1 question I get is “Rob where do I start?” I love this question because unlike a lot of aspect of personal finance, the answer is pretty much the same for everyone. Whether you make $1,000,000 per year or $25,000 the answer remains the same. Investigate.

When I started writing the 9 Moves program I wanted to put at least two Moves into the program that everyone would have to examine, no matter their financial position.So even if you are killing it with money, there are two Moves that you must look at: Move #1 and Move #9.

The Background

When we talk about where to start, I point to Move #1, Investigate. This Move is synonymous with being practical. People often think the answers lies in stock or get-rich-quick schemes but in reality, those “tactics” set you back. You must build a solid financial foundation before you press forward. Anything less than that will cause you detriment in the long game.

If you’ve ever read any of my articles on the 9 Moves program you’ll see that they are laid out in a “Why”, “How”, and “What” format. This is important to me because a lot of people are told what to do, they aren’t always told why they should do it or even how they should do it.

You know what I’m talking about, right? You’re leaving the house to go cash your first paycheck and your mom says “Make sure you always pay yourself first!” Or, you are at the bar with some friends and talking about money woes and they say “Bro, you just need to live on less than you make!” No duh. I wish I would have thought of what. What is missing is the meat. The details. How do I live on less than I make and whyshould I?

At a recent Q&A I had a young man ask me Why should I even bother to pay people back if they are already rich? The answer seems obvious but some people haven’t connected the dots because of how they were brought up. So the How and the Why are important. Very important. If all you do is drop fortune cookie wisdom you are just making noise; you’re not helping anyone.

How do you start?

I like to point to five areas of a person’s financial life where they can start winning:

1.Income

2.Expenses

3.Debt

4.Assets

5.Insurance 

I haven’t developed a clever acronym yet but it’s coming! For each area you are going to write down all things that touch that category. For income, write down every dollar (on average) that you have coming in per month. Expenses, look at every costthat you incur each month and write them down. Breaking them into categories will help you get a jump start on Move #2 which is budgeting.

Your debt is important as you need to know how much you owe and to whom you owe it. Assets include stocks, real estate, cars, primary residence, and savings. I include cars because sometimes people owe $25,000 on a car that is worth $25,000 and it is best for them to get out from under it if possible. While a car really isn’t a classical asset, it is worth noting.

Lastly, insurance. This one throws people but I’ve worked with clients who have saved $500 - $1,000 per year by shopping around their car and home insurance. My wife and I did this right before I started writing this financial plan and saved about $600/year. It’s worth a look. Just write down the type of insurance, premium and deductibles and call an independent agent to shop around what you’re getting. It may take an hour but it could be a profitable hour.

The Why

To close, it’s important to note why these things are important. If you are not in control of your finances, they will certainly control you. You will have more stress as you’ll likely be living check to check and you will also lose a lot of opportunities by not having cash saved and debt paid. Let’s say a business opportunity comes up and you can’t do it because you need to work a steady job to keep paying your student loans. That is what’s happening to twenty-somethings right now because of student loan debt. You manage your money because it is an adult thing to do that pays dividends in the short-run and long-run.

It costs you nothing to organize your finances. So what are you waiting for?