Staying Motivated With Personal Finance

As we all know, mastering or even just managing our personal financial situations is a long and tedious road. We make decisions that affect our personal financial situation several times each day. From the clothes we wear to the car we drive, to the lunch we eat..it all affects our finances.

Whether we like to think about it or not, we cannot escape the reality that we will never be completely free from the day to day management of our finances. The increasing stack of bills piling up in the mailbox and the all-too-automatic withdrawals from the checking account are a relentless reminder of our consumption.

There are people, like me, that are intensely concerned about their finances. I am certain there are others who are more concerned and more diligent with there finances than I am; this article is not for them.

What motivates you to manage your finances?

Of course we could sit here and debate the semantics of motivation and personal finance. However, for this exercise, we will let Wikipedia define those terms for us:

Motivation:

“The reason or reasons for engaging in a particular behavior, especially human behavior as studied in psychology and neuropsychology. These reasons may include basic needs such as food or a desired object, hobbies, goal, state of being, or ideal. The motivation for a behavior may also be attributed to less-apparent reasons such as altruism or morality.”

Personal Finance:

“The application of the principles of finance to the monetary decisions of an individual or family unit. It addresses the ways in which individuals or families obtain, budget, save and spend monetary resources over time, taking into account various financial risks and future life events.

Components of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, and income tax management.”

There, now that the definitions are out of the way we can get down to business!

What Motivates You?

Many people have been turned on to managing their personal finances more diligently because of a financial meltdown of sorts. It seems to be a common theme among financial writers and I think it is one that carries the most weight with the average reader.

Lets face it…we all want to make more money. It’s not a bad thing and it’s not evil. Wanting to excel is a basic human function. The need for constant improvement is what separates us from animals and the reason for our progression as a species.

My motivation comes from the fear of being poor. I grew up poor; not as poor as some…but poor.

Just to give you an idea (without too much detail):

  • I did live in a trailer park
  • My family did receive the charity hamper of food at Christmas for several years.

My family’s financial situation was hampered by the bankruptcy of the family business caused by my father’s health. In case you need further clarification about bankruptcy – it’s horrible. My parents are still recovering from that devastating financial blow and I vowed that it would never happen to me.

Even though I swore I wouldn’t be in debt up to my ears, I ended up with over $40,000 in student loan debt. I managed to pay that off and, within 3 years, my net worth has reach over $250,000.

How did I do it?

I Started To Learn About Money

I learned from the mistakes of my parents and began to research (formally and informally) the ways that the wealthy made money. I also learned about the importance of education and building the power to earn money.

Your ability to generate an income is the most important asset that you have. This is why Life Insurance and Long-Term Disability insurance are critical components of your financial plan in your younger years.

I also studied how mortgages work and the ways that financial leverage can accelerate your wealth exponentially. The concept of leverage is instrumental in learning how to carefully and methodically speed up the wealth accumulation process.

The ability to earn an income is the greatest asset that you have.

Think about that.

This is exactly why I am a huge fan of dividend paying stocks and income producing real estate. These assets generate cash flow. Increasing cash flow is the basic building block for generating wealth.

Cash Flow is the ticket to play the game.

Personal finance is a game. A very serious game, but a game nonetheless. As long as you have enough cash flow coming in to pay the bills, you can continue playing the game. Evaluate the cash flow that you generate and be sure to begin with a solid budget that does not exceed the cash flow.

Plug The Holes, Then Turn on the Hose!

I also started to learn about budgeting. Many of the people that I have talked to about growing wealth continue to harp on the fact that a budget is a budget, no matter the size. What they mean is that before you go looking to earn more money, you need to learn to master what you have.

This lack of control and poor foundation of the concept of financial planning is the reason why many lottery winners go broke within just a few years. Regardless of the amount of money you earn, if you have no idea how to manage it, you will end up in the same position.

It is essential to learn basic finance and budgeting skills. Don’t fall into the “I need to earn more money trap” before you learn to manage what you have.

  • Work first to decrease your expenses; then look for additional sources of income.

Remember, it’s not how much you earn, it’s how much you keep!

Make keeping more of your money automatic. Learn how to save more money every month by reading this previous article of mine:

http://dividendmoney.com/automatic-savings-is-essential

Golden Rule of Finance

This leads us back to the golden rule of finance which is:

Spend Less than you Earn!

*Note: Another dividend investor has also pointed out that in addition to spending less than we earn,  we must simultaneously find ways to both increase our income and decrease our expenses.

I’d love to hear your motivation for mastering your personal financial situation! Feel free to contact me with your story or drop a note in the comments.

6 comments

  1. Great article, Tyler. I learned the “Golden Rule” from my parents. They always spent less than they earned. The problem I ran into was my wife. She had no fiscal responsibility and so we started out our marriage taking on her $20k in debt. I had it paid off in a couple of years and then we started saving.

    I hope to pass these values on to my own children. However, it is a precarious balance between showing them fiscal responsibility and giving them the things you didn’t have when you were a kid.

  2. Nice article. I would like to add to the last sentence. Instead of Spend Less than you Earn, you should try to:
    Increase your income while trying to cut your expenses.

    The problem with most college graduates is that once they graduate and find a job related to their major, they see that they have much more income.. and they spend it all. The smart move would be to keep spending like a college student for several years, while you are getting paid a young professional’s salary..

  3. Good read Tyler. It looks like your past has well grounded you and prepared you to take on the future and succeed! I was married at 19 worked in a restaurant to support my wife and I while going to college. Nothing like adversity and the school of hard knocks to motivate you for success. I think a lot of success is coming your way.

    Best Wishes,
    D4L

  4. My motivation? Originally it was so that I would have a free lifestyle – a life to live the way I want to, with the values I want. Once I began actually learning investment fundamentals and applying them during university, I began to grow in confidence, and this has a snowball effect in and of itself.

    With each new significant step or realization, something clicks and I feel more in control of my own life. Most recently, for me, it was a new strategy for dividend investing.

    And although it would be very far off in the future (for any large impact – I already give back where I can), I am very interested in philanthropy and using funds in beneficial ways. George Soros is a great mentor here, but there are many others!

    Overall, though, I would say my motivation for financial improvement is to increase my options for living.

    thanks for your great posts Tyler!

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