Rules and Reality

Whenever you attempt to do something, you need to understand that success depends on reality not fantasy.  
You can dream all you want about that promotion or winning the lottery but until the reality kicks in, it is only
fantasy and your financial management is based on reality.  To that end, there are a few rules.  First,
remember, at all times, that this is just you and your spouse and the truth, no matter how disheartening, must
be followed at all times.  It doesn't matter what you tell your friends, but in your little world of managing money,
only the truth is important.

Let's start with: The Rules:
1.        Be truthful
2.        Be Private
3.        Stay Committed
4.        You Are Unique

If the above rules make sense, then skip to the next section, but consider:

      1.        You are wasting your time in developing a budget and financial management if you are not truthful
about the money that you intend to spend, the money you have spent and the long term goals for the money
you have saved.

      2.        Your current, past and future financial position is private.  Ever notice that Bill Gates doesn't tell the
world about his financial position?  Of course not, let the world guess but never confirm or deny.  

      3.        Anyone can make a New Year’s Resolution to save money or resolve financial problems, however,
dreaming and doing are two different things.  Wanting to make a change is a great first step, but budget
management, financial tracking and management will require time and effort for the rest of your life.

      4.        Your situation and potential is unlike anyone else.  Never believe that what works for someone else
will work for you.  While it may be great to have friends and lots of things in common, each one of your friends
is also unique and must make their own path.

This is one rule that can be easy to follow because it is so simple but it is so easy to build up a case in your own
mind.  Did I really spend that money?  Did I really buy that?  Where did it all go?  

This is normal and requires a lot of effort to create the habits that will payoff in the long run.  Here's the
underlying reason, unless you KNOW, not guess but actually know, the where, the when and the why, then you
are destined to repeat the same mistakes over and over again.  The situation won't be exactly the same, but
the mistakes are the same.  The truth, when admitted to yourself, provides a basis for making better, more
informed decisions.  

Every time you spend or make money, you are performing a financial transaction which has an impact on your
overall financial position.  Your financial position improves when you make smart decisions and gets worse
every time you make a bad decision.  Here's the best part: you get to define a 'Smart' decision and a 'Bad'
decision.  This is an evaluation that develops over time as you see the results of the financial decisions you

The truth comes into play in three major areas: first, developing a budget that can be lived in, second,
recording each and every transaction as it fits within the budget, and third, developing objective long term

      -        First, developing a budget that can be lived in.  The objective of a budget is very simple, what goes
out cannot exceed what comes in.  Some people think that it is budgeting when they stop spending when they
run out of money.  While this works for some people, this is not actually budgeting and does not provide any
positive long term results.  Budgeting means understanding how much money will be coming in and allocating
the money to the various expenses that will be incurred.  A couple of examples might help.  
              -        Everyone wants a roof over their head, this means rent.  Want to eat, then food would need to
be purchased.  Wearing clothes is always nice so some money needs to be assigned to clothing shopping.  
Budgeting means knowing in advance what the expected expenses are and putting money aside for each
expense so that when it is to be paid, there is money available.

      -        Second, recording each and every transaction as it fits within the budget.  Tracking the actual
transactions will be covered in more detail later, but every time money is spent, it should fall into a budget
amount that has already been established.  While you may over spend one area this month and underspend
next month, always be truthful so that patterns can be identified and established.

      -        Third, objective long term goals.  Whether you believe it or not, everyone has goals not for tomorrow
but for some point in time in the future.  A budget helps you prepare for the goals financially.  A goal can be as
simple as wanting to get a new couch for the living room to spending a month touring Europe.  Also, you can
have multiple goals, all working at the same time.  However, having a goal means that you are going
somewhere with direction and purpose, not having a goal means that you are not going anywhere, or at least
not somewhere that you plan on going.   

Here is the awful truth, your friends are not on your side when it comes to financial management.  While you
may talk about sales and great deals someone heard about, your friends want you to remain a part of the
'club'.  There is nothing wrong with being in the 'club', however, do you think that the 'club' will be together
forever?  People meet new people, people move away, people change.  Your friends want the 'club' to stay
exactly the same for as long as possible.

Preparing a budget and managing your money means that you recognize that there is a future and you need to
plan for it.  Your friends will have one of two reactions.  Either your budget will become the butt of jokes in the
future or there will be constant questions about how much are you worth?  Avoid both of these, keep your
financial planning private and answer any questions about your worth with comments about your piggy bank.

Decisions about how you spend your money should be your decisions not the majority rule of a group of people
that do not fully understand your situation, concerns or goals.  Budgeting and financial tracking are hard
enough to take seriously by yourself and can often require a serious self evaluation as you try to figure out
where you are going with your life.  

Time is your enemy.  Here is the theory, the greatest secret in the financial world is the concept of compound
interest.  What this means is that if you start investing, even a little today then it will be worth more than waiting
until tomorrow.  This concept is explained later, hang on (don't peek).

There is nothing easier than making a commitment, putting in effort during the first week or month and then
letting it fade away.  Here's the problem, financial management is a lifelong commitment.  The greatest benefit
will be achieved when time is invested every week.  As the investment in time is reduced, the overall benefit is
reduced accordingly.   

You are thinking that there is too much going on to invest hours and hours each week, but taking time today
establishes patterns and habits that make it easier in the future.  Yes, there is a reasonable amount of time
when setting up the budget and loading all of the data, but once this is done then the amount of time will
reduce.  Sorry, but there is no way that the budget can be set up for you.  Jumping ahead for just a minute:

This means that your budget will be unique to you and you need to make it yours.  

So, step one is to pick a time that will be set aside for your weekly investment.  Start by setting aside 90 minutes
a week, however, as you become more familiar with the process, the time will drop.  It is also entirely possible
that you are going to get so intrigued by the excitement that you will lose all track of time.  Seriously, once you
begin to see the positive results, it is possible that you can see the value of an additional investment in time.  

Think of it like this, according to 'CSI' your DNA, fingerprints and retinal scan are unique to just you and no one
else.  While you have lots in common with your closest friends, you have a perspective and opinions which are
slightly different or even mostly different from the opinions of your friends.   It is possible that a 'neat freak' and
a 'slob' can be great friends, a Yankee fan and a Mets fan can be great friends or a Democrat and a
Republican can be great friends.  What makes people friends is what they have in common, not what makes
them different.  You will have a dream or desire that your friends don't share and these are the things that
make you unique.

Managing your finances provides an opportunity to work towards a dream or desire and have it come to pass.  
Assume that you want to learn to scuba dive and your friends are all desert people.  Financial management
allows you to reach the point where you can take a trip to the ocean, learn to scuba dive and meet someone
special on the beach.  

Do you and your friends all work for the same company?  Is one of your friends your boss or are you the boss?  
If you work for different companies, do you all have the same pay levels?  Who is the professional and who is
the blue collar?  Here's the point.  Without regard to who you are or what you are, you have the opportunity to
make choices that will change the direction of your life and your future.  Don't give up that option.

Reality can be scary if you are unprepared for it.  Ever watch the people on TV and notice that everything
works out for them without regard to what they do right or wrong?  There is a reason for that, it's TV – not real
life.  Ever notice that there are no cameras catching your every move?  You need to live your life within the
limits established by your income.  Your credit cards don't get paid off magically each week, what you spend
must be paid in the future.

So, how much income are you earning?  Is it enough?  It always seems like it is never enough, without regard to
how much you earn.  Financial management is, well, managing your financial position based on how much you
earn.   While it often seems impossible, this is the only way to ever make any progress in your road to wealth.  
There are a couple of options to fast wealth and either they are illegal or very, very high risk.  The illegal stuff
could result in jail time or death.  The risky stuff often includes gambling of one form or another.  Here is the
secret to wealth through gambling, own the gambling house because the house if the only player that always
comes out ahead.  Every form of gambling needs someone to lose and someone to win and the games are
never to the benefit of the player or the house would go broke.  Even buying $1 lottery ticket is a risk since the
chance of winning is millions to one - sure you are only losing $1 but every gambler believes that he will
eventually be the winner, it just requires one more bet, betting a little more each time.

The concept of wealth has it's own chapter and well worth the wait, so instead, consider the saying from Old
Richard's Almanac (developed by Benjamin Franklin).  “A penny saved is a penny earned.”  At first glance, you
are wondering how could this apply in today's world, a penny is nothing and can't buy anything.  This saying
was developed in the 1775-1790 time frame from the history of the United States when the country was first
being organized.  At the time, a penny was worth a lot.  Consider this, if McDonalds had been around back
then, a cheese burger value meal would have been 1 or 2 pennies.  So replace the word penny with dollar and
it becomes more meaningful – a dollar saved is a dollar earned – although it sounds better in the original form.  
“A penny saved” - what does this mean?  Does this mean putting a penny in the old piggy bank?  Consider
instead that the word 'saved' refers to finding a way to reduce the cost.  The second option flows into the
second part of the saying - “is a penny earned” - indicating that when the effort is made to reduce a cost to a
save a penny then the savings have been earned.  The thing about anything of value is that seems to be worth
more when the person has earned it instead of being given it as a gift.  This means that when a penny is
earned, it will have more value to the person that worked to save the penny.  The more that you can treat each
penny or dollar as something of value, the easier it becomes to make the needed sacrifices to save a penny.
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