7 Signs of Great Personal Finance Management

7 signs of great personal finance management.   When investing (in anything), having a good system, process, or set of guiding principles is the best way to ensure long term success. The same is true for almost everything else in life, including personal finance.  So I figured those 7 habits would make great "road signs" to let you know you're on the right path, regardless of the current state of your finances.  You are proactive, You begin with the end in mind, You put first things first, You Think Win-win, You seek first to understand, then to be understood,  You Synergize, You Sharpen the saw.
Disclosure: I adapted these from 7 Habits of Highly Effective People by Stephen R. Covey.

Most of the time you know your finances are in good shape if you have money - little to no debt, positive net worth, etc.

But to get there, there's a whole host of tips, rules, guides, advice, etc. that you can follow. But how can you judge if you're really doing great?

Maybe you're following some rules and ignoring others.

Maybe you're actually doing the right things now, but your finances are just bad because it took a beating from the time when you weren't so responsible.

Maybe you're an uber-sophisticated investor, but your family is strictly savings-account-only. If your finances are entwined, how do you evaluate that?

When investing (in anything), having a good system, process, or set of guiding principles is the best way to ensure long term success. The same is true for almost everything else in life, including personal finance.

So I figured these 7 habits would make great "road signs" to let you know you're on the right path, regardless of the current state of your finances.

You are proactive

  • Create a budget. Even if you have a small income, it doesn't mean there's little or no need to plan. In fact, there's a greater need to do so, since there's very little or even no excess cash that can go to savings or investments which could ultimately be used for a better financial future.
  • Find ways to save money or cut costs.
  • Look for additional income streams: sidelines, odd jobs, online jobs, etc.
  • Whatever your finances look like now, always review and look for improvement. It's not abut being miserly or greedy. Often times, lifestyle creep happens. Even when it doesn't, there's no telling if an ultra-expensive emergency is around the corner. It's ok to seek a reasonably comfortable life; just don't let your finances run on auto pilot for too long.

You begin with the end in mind

"Don't let your dreams be dreams"
- Jack Johnson, Dreams Be Dreams
Have goals and know what must be done to achieve them. It's not about money, it's about your dreams.

This way you're not aimlessly chasing savings and gains.

And if you have goals, it's much easier to stick with your budgets and investments, instead of occasionally backsliding into bad habits.

You put first things first

Schedule your priorities - which should be the steps needed to achieve your goals and eventually your dreams.

This way, you aren't putting off the important and responding to emergencies.

Plan ahead and prepare.

You think win-win

This is very important for couples, and those supporting their parents or other relatives.

If your finances are entwined (which is the case when you support them), plans and budgets should include the goals of others. Or at least do not marginalize them.

That way, they're as motivated as you and much more willing to support you.

You seek first to understand, then to be understood

One of the biggest hurdles in budgeting or planning your finances is when your partner (or parents, relatives, etc.) don't understand its importance and are unable to commit to the plan.

Instead of hammering away at the importance of financial planning and investing, try to listen to them. What are their concerns, their goals, passions, and dreams? What do they want out of life? Why do they spend the way they do? And maybe, why are they afraid to invest?

It's important to get their side, so you can show them how financial planning and investing can help them. It's not something to control them but instead to free them.

But you have to listen to them before you can know how to make them understand.

You Synergize

Obviously, working together can lead to better results.

This can be true when pursuing an additional income stream. Maybe you can share the time commitment necessary.

Maybe certain investments can be delegated. Or even parts of the budget; or other cost-saving activities.

While this can take many different forms, it's undeniably more productive if you and your partner (or family) are working together to achieve your goals.

But even for single people, this can be applicable. Synergy can be in the form of strategic moves to leverage what you have or be more efficient with how you spend. Like stacking rebates on top of loyalty cards, timing the purchase during a sale or promo while making the purchase in the most reasonably priced store.

You sharpen the saw

Keep learning. There's always something new to be understood. For example, maybe you already know about UITFs and mutual funds and have moved on to direct stock investments.

But recently ETFs were introduced in the market. And in the future REITs could be next. And of course, the much-delayed and highly-anticipated PERA.

After that? who knows, maybe commodities (i.e. gold, oil) could be traded in the Philippines by then. Or maybe global funds of funds become available.

Even if that doesn't happen, there's a whole host of other things like real estate, your own business or maybe even venture capitalism.

There's always something new to learn. And each one is a potential opportunity to better meet your goals and achieve your dreams.

Rest assured it's not going to be tedious. Learning isn't school, it's life in the driver seat.


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photo credit: Michael Francis McCarthy via photopin cc

2 comments:

  1. "Instead of hammering away at the importance of financial planning and investing, try to listen to them. What are their concerns, their goals, passions, and dreams? What do they want out of life? Why do they spend the way they do? And maybe, why are they afraid to invest?"

    I plead guilty on the hammering part:p

    I now realize that if I want to help somebody with his/her finances, the best way is to act as a guide and that means letting that person take the lead and just gently pointing him/her towards the right direction. So yeah, listening is really key.

    Great post!

    ReplyDelete
    Replies
    1. Thanks Jill!

      I learned it the hard way myself:D

      Delete