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Mind the Finances – Project the next 30 days

In a prior post we began covering steps to Mind the Finances.

In this post we’ll “begin” covering the process of Managing the Income and Outgo.

Again, why is all this so important? Because, the state of our finances can represent contentment or stress. To achieve Mind Like Water, we want to remove all forms of stress in our quest to create a life of effortless abundance.

So, let’s get to it!

Manage the Income and Outgo

The primary objective is that of becoming financially independent. Wikipedia defines this state as follows…

Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.

Don’t you get a blissful feeling thinking about achieving such a state? The good news is that it is very possible – even before “normal” retirement age. Yes, for you too. That is, if you are willing to discipline yourself in the practices needed to get there!

In a prior post we covered the 2 paths which can be taken:

The shortest timeline results from doing BOTH at the same time 🙂

While doing the above, we must takes steps to carefully manage the flow of income and outgo. This includes:

  • Projecting the next 30 days
  • Paying expenses on time, every time
  • Paying ourselves first
  • Saving and investing wisely
  • Contributing to worthy causes

Projecting the Next 30 Days

One challenge everyone will have at some point (certainly when starting out) is that of running out of money before running out of month 🙂 This can result from not planning for the flow and timing of our expenses as relates to our income. And/or worse, the habit of spending more (maybe WAY more) than we earn. I know, I’ve been there!!!

Common advice suggests that we prepare a budget. This includes creating a list of all expenses incurred and income received on a monthly basis, factoring-in those expenses which occur less frequently (quarterly, each 6 months or annually). From here we add up the income, subtract the expenses and see how things “should” look at the end of each month. This is an important step to create a “general” awareness of our financial situation. And, it allows us to make decisions on how much we should limit spending, on each category (e.g., groceries, clothing, eating out, etc.).

However, this doesn’t address the challenge related to managing the “flow.”

That is, we must account for the timing related to making specific payments against the receipt of income. Doing so ensures we avoid:

  • Paying late (as we await funding), bouncing payments, etc.
  • Having cash sit idle in an account that pays little to no interest, when it could be working at least a little harder for us

A key practice I put in place many years ago, which helps to manage flow, involves maintaining, on an ongoing basis, a 30-day projection of my finances. And, the available tools make this super-simple!

When using Mint.com we’ve already established the fact that we have up-to-the-minute balances for all our accounts, in a central location. While this information is good, it is only half the picture: like looking in the rear view mirror of our car. We can see where we’ve been but not where we’re going.

Let’s now project the future. Well, at least the next 30 days…

The first step is, using Mint.com, setting up payment reminders for ALL our recurring (monthly, quarterly, yearly) expenses. Upon doing so, we’ll be reminded of any upcoming payments within the next 30 days each time we login to Mint. Next, as payment reminders show-up we simply input a pending transaction in Mint, in the account for the date that it will hit.

In addition, we can do the same for our income, by setting up pending deposits for the date(s), in the next 30 days, we expect our paycheck to be “available” (a.k.a. cleared).

Once we’ve done the above we can view our account in Mint and it will display 2 balances (side-by-side):

  • The current balance as known/provided by our bank (in green)
  • The projected balance after all pending transactions have cleared

Voila! We now have a clear picture of what things will look like over the next 30-days upon covering the “known” / recurring obligations that we’ve established with our money. Now, all we need to account for are the variable expenses, which fall into 2 categories:

  • Required – Groceries, gas, etc.
  • Optional –  Clothing, eating out, concerts, new toy, etc.

Now, as we proceed through our lives, all we need to do is view our current 30-day projection to know how much of the above, if any, we are can afford (out of our cash flow).

In closing, the intent here was to cover foundational steps for managing the flow of income and outgo. In future posts we’ll cover:

  • Paying expenses on time, every time
  • Paying ourselves first
  • Saving and investing wisely
  • Contributing to worthy causes

More to come!

Mind the Finances

The state of our finances represents a key scorecard in life. At a high-level, it provides a measure of:

  • The quality and quantity of service that we (as individuals) provide society
  • How effective we are at managing that income as well as the outgo

This site provides numerous posts covering methods to continuously increase our service and income.

The purpose of this post is to cover the topic of “Minding the Finances”.

To get started, let’s reiterate: It is NOT how much we make. It is how much we keep (e.g., don’t spend, or lose) that matters! With that in mind, let’s cover the following topics:

  • Watch it like a hawk
  • Eradicate ALL debt
  • Block the dirtbags
  • Manage the income and outgo
  • Use protection

Why do we want to do all of this? Because, the state of our finances can result in contentment, or stress. And, to achieve Mind Like Water, we want to eliminate all forms of stress. So, here we go…

Watch it like a Hawk

The first step is knowing EXACTLY where we stand with EVERY financial account we own – on a 24×7 basis.

The simplest method I have found for this is using the free service offered by Intuit (maker of Quicken): Mint.com.  In a matter of minutes I was able to setup my profile and pull in information from ALL my financial accounts. And, each time I login (from my computer or iPhone) I have immediate access to the most current balances and transactions (again, for ALL my accounts).

There are many benefits to this, not the least of which includes…

Having up-to-the-minute status of all my accounts, in a single view, helps tremendously in spotting potentially fraudulent activities early, vs. the “old way” of waiting for a monthly account statement.

Finally, this puts an end to the tedious process of balancing a checking account. The reason: we ALWAYS have the most up-to-date balances available, including transactions that have cleared, are currently processing or are pending (e.g., a future-dated check).

Debt Eradication

I’ll start (with what some may consider a shocker) by reinforcing that “if” we have ANY debt think: my hair is on fire!

Why do I say that?

Because debt places some portion of our lives under the control of a creditor. Said another way, we become a slave to the debt.

While this may be appropriate for a “temporary” period of time, it need not be a dark cloud hanging overhead for our entire life.

By taking disciplined measures we can rid ourselves of ALL debt in a relatively short period of time.

In the spirit of brevity you are encouraged to read 2 prior posts covering the topics of:

The feeling of freedom, experienced after doing-so, is absolutely incredible!

Block the Dirtbags

In addition to managing our own financial habits we must make sure the dirtbags (and there are a few out there) don’t steal our money.

One of the worst things that can happen is someone taking out a loan in our good name that we are then expected to pay back. Ouch!

Yes, there are identity theft protection services for which we can pay a nice annual fee. However, they only alert us WHEN potentially fraudulent activity occurs and make an attempt to resolve the issue AFTER it occurs. Wouldn’t it be better to stop this activity dead in its tracks (BEFORE it occurs)?!?!?

We can. And, we can do this (almost) for free!

Realize, when we apply for financing (a credit card, auto-loan, etc.), the organization we wish to do business with checks our credit report which entails querying one or more of the 3 credit reporting agencies (Equifax, Experian and/or TransUnion). Assuming our score is good we’ll get that financing, and the better the score the lower the interest rate.

The same happens when a dirtbag applies for credit in our good name. All they need is a few pieces of information most of which is available online (whether we like it, believe it, or not).

So, the objective is to instruct the credit reporting agencies to deny all credit checks against our good name.

How do we do this, while at the same time maintaining a good credit score and the ability to apply for credit if/when we need it?

Simple! Contact (online) the 3 credit bureaus (Equifax, Experian and TransUnion) and follow their simple instructions to put a FREEZE on our credit report. To learn more, or get started, click on each of the 3 credit bureau names provided above.

Once setup, if anyone attempts to take out a line of credit in our good name it is immediately refused.

And, they each offer a simple method to quickly / temporarily “thaw” our credit report, if/when we are seeking to establish a new line of credit – for real.

At this point, I’ve written enough for this post 🙂

In closing, minding our finances is a key step in achieving Mind Like Water, with the goal of creating a life of effortless abundance. It is just a matter of doing it!

In subsequent posts we’ll cover the remaining topics on Mind the Finances.

All the best!

Balance the Checkbook – Why?!?

How many archaic things do we do which are “no longer” necessary?

Have you shoed your horse lately? I imagine there are a few equestrians out there who could say “yes.” But, for the rest of us, that doesn’t apply.

Now, let’s talk about balancing the checkbook. I haven’t done so in years! Exactly what is the purpose? Now that I’ve got your attention, read on…

Let’s first explore why one (previously) had the need to balance the checkbook. Essentially, we needed to confirm that the balance we had been tracking in our “offline” / paper checkbook matched the monthly statement received from our bank. Often, we found a “surprise” in the form of an ATM withdrawal we forgot to record or that we had recorded an inaccurate amount. On occasion, this resulted in a check bouncing, incurring a bounced check fee and some mild embarrassment. I hate that!

Today’s reality – We no longer have to wait for a monthly statement from the bank to know what our balances are. We have access to “up-to-the-minute” balances on a 24×7 basis as each of our financial institutions provide online access to our accounts via their (individual) websites. More importantly, however, there are tools which can be used to aggregate this information into a single view. I’ve used lots of tools including MS Money (now dead), Quicken, etc. The tool that I’ve found most useful is Mint.com. Intuit (the maker of Quicken) offers Mint, online, FOR FREE. I love that!

Following are “some” of the benefits I’ve found with using Mint:

  • You can view the “real-time” balances of ALL your accounts (banking, credit card, investments, loans, etc.) from one screen on your computer and smartphone.
  • You can setup payments you have scheduled to make in the future, as well as bill reminders.
  • You can review your checking account register, just like you would the old, crusty paper edition.
  • You can setup and monitor a budget and financial-related goals.
  • Setup takes less than an hour (for dozens of accounts).
  • Mint ONLY takes “inputs” from the user, and their financial institutions. That is, transactions (to pay someone, for example) cannot be initiated from Mint. This is a great security feature which gave me comfort knowing that if someone were to hack into my account the “worse” thing they could do was view my stuff. They cannot process transactions on my behalf.
  • It is “in the cloud” so you can access your financials from anywhere / anytime.
  • And, finally, did I mention? It is free!

So, if up-to-the-minute balances are available for ALL of our financial accounts, in one location (much better than individual checking and/or saving registers) why go through the monthly process of reconciling? When using tools like Mint we are automatically reconciling each time we access the tool as all our accounts are automatically updated with transactions from all our financial institutions. We can view our balances, the transactions that have already occurred, transactions we have scheduled as well as reminders of things that are upcoming that we need to attend to.

Give it a try. You’ll find that you have much better / accurate information on your financial standing, and you’ll get time back in your life that you would have otherwise spent shoeing a dead horse.