Money Management

Presumably, everyone has a philosophy on how to manage money, which can be defined in multiple ways. And I am like everyone else, but since I have a blog I figured I would share and offer for anyone who wants to compare.

To start, I am not a financial expert, and don’t have hundreds of thousands of dollars readily at my disposal. I consider myself upper middle class, but started in the middle class as a young military officer in the early 90’s. But like all of us parents, it was on me to teach my daughters how to manage money when they became adults. That particular aspect will be shared in the StartPoint Book Blog, this can serve a cross-reference to underpin that blog for interested parents.

In simple terms, I consider money management the means by which you ensure income exceeds output. With that said, the way in which this is done is markedly more difficult. My post does not explore the different techniques, or investment strategies to maximize your money; but I want to share the different types of mindsets. The respective mindset ultimately dictates the techniques and strategies, from a young age and into the varying stages of adulthood.

When mentoring young adults, I established four categories of “mindset” to help them be self-aware as they begin to navigate this critical aspect of adulthood. There is a natural balance between reality and your perception, below are the four combinations I used:

1) Have money but perceive you have none/less than in actuality. This creates two phenomenon - first, you live within your means and tend not to overspend. You are also deliberate with how your money is spent. Two, you may not fully experience all the opportunities available money offers due to this conservative approach, at least early on.

2) Have money and perceive you have plenty. This is aligning reality with perception and would naturally appear to be ideal. Though this may be the case, they key caveat is that all aspects of money management is factored (i.e. savings, investments, insurance, accurate forecasting, risk mitigation measures, etc.) to sustain such a status.

3) Not have much money and perceive you have little. For this, the key is to recognize where you are financially and align your spending with that reality. Not having much money is not a problem if you live at the level commensurate with that amount. Obviously, there are broader issues, and hard priorities that have to be accounted, but accepting your reality is a critical start.

4) Not have much money but perceive you have much (worst of the four). If you are not matching how much money you spend with how much you make/have then it is only a matter of time and scale of how bad when reality hits. Such a perception, whether consciously ("keeping up with the Jones") or unconsciously (slightly overspending without realizing until in debt) will affect how you live, relationships and access to more money, both in the short-term and in the longer.

How you perceive your state of finance will most directly affect your spending habits, which coupled with your actual income sets the foundation for your financial status. All scenarios have some combination of pros and cons, we just have to recognize what those are and where we fit.