Month: January 2013

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Wealth Maintenance – Budgeting


The reason you need to know where the money comes from and where it goes to is to plan for the future. That is called budgeting.

In the last article, we touched on the practice of tracking the sources of your income. Similarly, keep track of your spending. This activity is so vital for budgeting. As you know the spending categories, the amounts, the patterns, you start drawing your budget’s draft.

You don’t have to do this with paper and pencil anymore. Invest in a good personal/small business accounting software. They have become so sophisticated and fun to play with.

I’ve had some experience with Quicken. The features are overwhelming: You can track your spending down to the penny, enter your financial institutions’s details, download your transactions from those institutions to the software (so you won’t need to manually enter each spending), create cash flow charts, and most importantly to our discussion here, create budgets!

As the software becomes familiar with your spending patterns, your income, and your liabilities, it helps you create a professional budget very quickly and effectively. Of course, you must be aware of what the software is doing, and guide the processes to your special preferences.

Quicken is not the only software out there. Microsoft has Money, and there are few others. Do not use a 2nd tear software for this task. It’s worth a $70 or so investment.

Once you have your budget in place, you can use it to guide your spending from now on. But what is a budget? That’s what we’ll talk about next time. One important tip before we wrap this up: Always prepare your budget, especially the personal one, with your significant-other. She or he must be involved to avoid conflicts down the road. But more importantly, sharing this is a sign of mutual respect, and hopefully, love 🙂

The Wealth Maker

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Wealth Maintenance


 

In the last 40 articles, we have covered the secrets, concepts, principles, methods and best practices of creating “enlightened” wealth.

Starting from this post, I’m going to shift the focus to the second stretch of the path, which is preserving and maintaining the wealth you have created so far.

Climbing to the top is not easy. Staying up there is even harder! Unless you have a wealthy mind and heart, you could find yourself down at the foothills in no time. There are so many ways to waste a fortune. On the other hand, keeping and growing that fortune takes vision, planning, and above all, discipline.

A wealthy person carries great responsibilities towards himself/herself, his or her family, and the community he or she lives in. Money is not “ours” to hoard! It is a gift that we must use wisely and share generously.

The first step in maintaining your wealth is to know, exactly, where the money is coming from, and how, and where it is being spent, and how.

Why would you need to know “how” the money is generated? To be an enlightened wealthy person, you must generate your money ethically. We have already established that in previous posts. Let’s take an example: While checking your last income statement, you notice an extra 100K. You become carious. You investigate the source of that unexpected sum. Finally, you discover that one of your assistants had been involved in an unethical money-making activity, which is harmful to the society. Whether that was intentional or unintentional is irrelevant now. That money must be returned properly, and the harm must be compensated.

Next, you need to track where the money is going. Depending on the number  of people spending the money, and the variety of activities involved, you may need an accountant to carry out this task. It’s time-consuming, even for an individual with two or three transactions a day. There are plenty of online tools, which you can download to your smart phone, and record every purchase, payment, loan, etc.

In the next article, I’ll expand on the above points a bit further.

Till then, stay safe, make money ethically, and spend wisely!

 

The Wealth Maker