A cash flow plan will function best if it reflects your goals, whether long-term or short-term. The purchase of a pleasure boat in three years or the decision to remodel your basement next winter should influence your cash flow plans.

The goals that you have already set will help you shape your personal version of this system. Refer to them often.

As you achieve some short-term goals, or begin to see significant progress towards long term-goals, your enthusiasm for this process will increase – and that will make the system even more effective for you.

ESTABLISHING YOUR SYSTEM

What should your system contain? There are four factors that will help you establish control over money:

• INCOME/EXPENSE
Identify and isolate income and disbursements (referred to as expense). You will consider whether income is gross, or net (the amount you actually have available).

• CATEGORY
Define the kinds of income you receive and the kinds of expenses you incur. Categorize them according to the fixed or flexible nature of the item.

• TIME
Your system should be based on a monthly structure. You should quantify your income and expense within a 12-month format.

• AMOUNT
Income and expenses are expressed in dollars.

Once you have qualified all financial transactions, you will be well on the way to controlling your cash flow, rather than letting it control you.
 
PERIODIC FIXED EXPENSES

Many people have lost control over cash flow because they have no system to handle periodic known expenses of a substantial nature. Good examples of this type of expense might be a large real estate tax bill of $1,500 due every March, a life insurance premium of $840 due in November, or an IRA deposit of $2,000 which must be made by April 15th.

What people frequently do is remember the bill a month before it is due and start scrimping, but it is too late! So, what happens then? In the ensuing months, they start running behind on bills or they simply do not make the planned payment at all. Interest charges are then added, and their attitude starts to decline.

The solution is to schedule these larger payments and start saving for them on a monthly basis. For example, for a small additional amount, an automatic bank deduction can be made regularly to cover the $840 life insurance premium.

The $1,500 tax bill is due again in 10 months. Why not set $150 aside into a special savings or credit union account? Then when it comes due, you will have the money. Afterwards, you can reduce the monthly savings amount to $125 since you will have 12 months to accumulate the next payment.

If the IRA $2,000 deposit is due again in eight months, put aside $250 each month until then. After it has been paid, the amount to set aside is only $166. Furthermore, you will be earning interest on these escrow funds, rather than paying interest as a result of poor money management.

Initial savings ($150 + $250) $400 monthly; thereafter only ($125 + $166) $291.

SAVE REGULARLY AND SYSTEMATICALLY

It is important to assign a portion of each paycheck for your savings and investment program. Consider it an obligation just as important as any other monthly obligation.

In addition to saving a portion of monthly income, we strongly urge that any money saved by tax planning each year be invested the following year. This will give you an additional source of investment funds as well as a means of reducing income tax liability on a regular basis.

Your personal financial situation is comparable to that of a business. Both have concerns for profit, income and expenses, and spending decisions affected by anticipated circumstances. Consequently, personal cash flow management is designed to handle your financial situation like a business, and you will function as the controller.

A SYSTEM, NOT A BUDGET

Cash Flow Management is a system, not a budget. It will allow you to see your financial situation from a long-term, systematic viewpoint. You will see how one move, such as a periodic tax payment, can affect your disbursements for several months prior to, and following, the actual payment. Budgets are too immediate in scope to allow you to relate a March income to a July expense.

It is essential for you to begin a systematic savings and investment program to accomplish financial and retirement goals. Every successful business relies upon a system to control income and disbursements. Your personal financial situation is comparable to that of a business, and is no less important!

Most people have not saved as much as they would have wished. The reason is not that they did not intend to save, but they did not have a system. Lacking a system makes it very easy to be distracted by the many opportunities to spend earnings.

Your financial needs and desires present unique situations, and your system must be flexible enough to accommodate whatever you require. Tailor it to fit yourself and your family; do not rely on what your neighbor does.

While your friends or neighbors might be managing cash flow to save for a European vacation, you may need to direct cash flow towards current tuition for a degree. Your system should be flexible, but also rigid enough to be a guide and point you in the right direction.

If your cash flow system becomes a hindrance, do not abandon it; redesign it. With sensitive shaping to your needs, it will allow financial freedom rather than acting as a financial barrier.

A Personal Cash Flow Management System, if used consistently, can be of great value in helping to gain control of your personal financial situation. It will ensure that there is always cash available to pay bills as they come due. It will also help you save more money in a systematic way.

Time is your greatest ally. The more time you have, the less money you will need to save and invest. The less time you have, the more money it will take. Procrastination is a deadly enemy of your goal to retire with financial dignity.

Part Two Next Week

• Lack of Confidence

“I can’t” (manage my money).

“I definitely can’t” (make informed investment decisions).

“I don’t know how to” (find out what I want to know – and even if I did…)

“I couldn’t trust myself” (to interpret the information correctly).

“I’ve never had to” (pay the bills on my own).

“I’m not sure if I can” (follow through).

A lack of confidence is not confined to one sex, but it has been more prevalent in women. Regardless of the changing roles, some women still feel that showing competency in financial situations is unfeminine. Many men still maintain complete control of the family finances, however poorly they may manage them. While these relationships are shifting, lack of confidence discourages learning new information and skills.

• Overconfidence

“I already know what I need to do” (there is little new I can learn).

“I’ve been managing my money very successfully for years” (I really do not need any help).

The opposite of underplaying financial competence is knowing all the answers. This is more common with men. They have been told they are expected to know it all – the masculine mystique. In many cases, the financial situation has been handled well, but can be improved upon.

• Sequential Thinking

“First I must take care of this and when that is done, I will take care of that….”

This type of thinking is typical of the couple who cannot plan for retirement until the children finish college, or the affluent young adult who cannot set aside money for emergencies and take care of paying current obligations.

• Procrastination

Desire for perfection. “Unless I can make X percent on this investment, I won’t go into it.” “Unless you can guarantee that I will earn X amount by this date, I just won’t act.”

Sequential thinking. “I will act as soon as I have all the facts.” “The economy straightens itself out.” “When I get a raise.” “When my spouse gets a job.”

Avoidance of painful subjects. “I can’t think about dying or buying insurance.” “I don’t want to think about becoming disabled.”

The perfectionist fears discovering a financial decision was not the best possible move. Sequential thinkers and procrastinators have an inexhaustible supply of reasons; there will always be another contingency.

The person avoiding painful subjects will delay acquiring adequate insurance because he or she is unable to think about death or the possibility of disability.

• Lack of Definite Goals

“I put long hours in every day; I just don’t have time for anything else.”

People without goals are not shiftless or lazy, just extremely shortsighted. Some continue to work 10 to 14 hour days both bragging and complaining about the long hours, but with no plans to change or upgrade their circumstances.

• Goal Confusion

“I don’t have enough money to travel.” “I can’t seem to plan for my vacation.” “I never have the money to do what I really want to do.”

Some people know exactly what they want – a vacation in Europe or Mexico, maybe the purchase of a second home – but they have never had the money to reach their goals. They allow secondary goals, eating at gourmet restaurants or buying expensive gifts to pre-empt their primary goals.

To help solve these six money hang-ups, talk with a professional. Recognition of the problem is the first step toward a solution. A financial advisor can suggest a number of ideas to help overcome money mismanagement.

The late Loren Dunton, founder of the non-profit National Center for Financial Education in San Diego, wrote about his lifestyle decisions to buy new cars and spend weekends in Reno, instead of investing a hundred dollars each month in a mutual fund when he was in his late twenties. That fund would have been worth over a million dollars today.

AN EXPENSIVE CAR

Perhaps you think the difference between a full-sized car, fully-equipped, and a compact is only about $10,000. Actually, it is more like a million dollars. Consider this, borrowing $25,000 for a new car over four years will cost about $634 a month, while borrowing just $15,000 will cost only $381 a month.

If one saved the difference of $253 each month for 35 years, earning an 8% average rate of return, it would swell to $580,352. However, that is just the accumulation of the funds. What about the earnings as the funds are withdrawn during retirement?

If one were to get monthly payments of $4,479 from that sum from ages 65 to 90 (and some predictions say there may be over 250,000 people over the age of 100 in America in the 21st century), the total amount collected would be $1.3 million.

This is the magic of compound interest. However, it is not retroactive! One must save now to enjoy the benefits of compound interest in the future.

WAITING TO INVEST

For instance, if the difference in the example above were saved for only 25 years it would grow to just $240,000. Paid out at $1,857 a month, the total would be $557,000. It is amazing that the difference in saving an additional ten years is about a half million dollars. However, the monthly difference in payments of $2,622 monthly shows how today’s lifestyle decisions can be worth a million dollars in retirement years.

When should people begin saving money? Never soon enough. If ten years could mean a difference of $2,622 in retirement income each month, can you imagine what 15 or 20 additional years of savings would mean when you reach age 65?

JUST A LITTLE POSTPONEMENT

For some, no doubt saving now would be easier if there was more current income. People 17 to 23 years old may think: “Me save? Are you kidding? I am just getting my education and besides I want to have a good time. When I get out of college and start my career, I’ll start saving.”

People 24 to 30 may be tempted to think: “You don’t expect me to save now? I have only been working a few years. Right now, it is important to dress well. I’ll save later.”

From 31 to 42, the reasoning may go something like this: “How can I save now? I am married with small children. Perhaps when they are older I can think about saving.”

Those 43 to 55 wish they could save now. However, many just do not, saying they cannot because of children in college and education loans to pay.

From 56 to 65 most recognize the urgency to begin saving now. However, money is tight. It is not easy for people that age to better themselves. It is tough to break years of over-spending habits. “Maybe something will turn up,” many say.

At age 65 and older, it is too late to begin saving money. You cannot save when there is no income. Many older people live with their children and are dependent on Social Security, which is inadequate, since Social Security was only designed to be supplemental.

If the choice between cars can impact retirement income, imagine the possibilities when applied to lifestyle choices such as a home, vacations, dining out, entertainment, wardrobes, furnishings, etc.

Try to develop the art of money accumulation now. Begin by saving every day. Start today!

Spenders who need outside help may benefit from the support of a more frugal friend who would be willing to act as a money mentor or spending coach. If you recommend to a friend Debtors Anonymous, don’t be surprised to hear a quick “no.”

Some people are too ashamed to admit that they may be damaged in this way. You may have to think of other solutions, such as a financial recovery counselor. (Karen McCall and her associates at www.financialrecovery.com and Bari Tessler’s group at www.consciousbookkeeping.com are two valuable resources.)

Two more tips: Once you’ve developed guidelines for an overspending friend, or yourself, take care not to call it a budget – a word that free-living boomers mentally translate as “ball and chain.” Refer to it instead as a spending plan, or a spending, saving, and investing plan, or even a financial growth plan.

Those of you who may be in denial about this I ask you to describe three scenarios: (1) what happens if all your dreams come true; (2) what happens if outcomes are just so-so; and (3) what happens if you have made mistakes that force you to change your lifestyle. What will your life be like? How will you feel? What will your friends and relatives say about you?

I suspect that when you reach scenario # 3 the last question may unleash shame, regret and many pent up feelings. Find out the reasons for overspending. Just like people who over eat, over indulge in alcohol or drugs the actions are symptoms of inner turmoil.

Parents want their children to be self-sufficient and financially literate, but many are unsure of how to achieve these goals. They often look to me for help or education programs to help raise financially fit kids. When I was a child, very few families were very wealthy. Consequently, we learned the value of money quickly and every day. Today, many parents have high incomes (when your household income is over $75,000 that places you in the top 7% of income earners) and lavish their kids with everything they demand. At the same time, they are picking the kids up in high priced autos that, just a generation ago, one spent on a new home. The parents tell the kids to be more prudent with their money, but, the children are watching their parent’s actions.

Parents should begin discussing and educating their children about money at an early age. I have had clients come to the office with a child ready to go to college in 2 years, and the child has never had any responsibility for money. A child should be able to make good decisions about money before 10 years old.

Unfortunately, a report conducted by Strategy One, polled 1,100 American teens and found 62% believe they are prepared to handle adult financial responsibilities after high school. Yet, in the same survey only 41% knew how to budget, 34% knew how to pay bills, and 26% understood how credit card interest and fees work.

The Early Years

When children are in elementary school, parents should point out the advantages of starting to save and invest early. Around age 5 is a perfect time to provide an allowance so the child can make some of his/her own decisions. The parent should use trips to the grocery store to teach the child. If the child has money to use they can participate in the spending process.

After the child learns to spend, then, the next step is money management. The allowance should be distributed among different colored jars; spending, saving/investing, charitable giving and a fourth for education. This is a way for children to learn and see what their money can do for them. This helps families show their value system and for the kids to learn that money is not just for spending. The children can learn they can get whatever they want, but it takes time and discipline.

Parents should keep children and young adults aware of their financial situation so they can learn from their parents’ actions. Parents should discuss through large purchases with their spouse or another family member within earshot of the child. Keep in mind parents, although the kids may not be picking up their messy rooms, they are picking up their parents’ money thoughts and messages. Parents can and should teach their kids to be good consumers. In so doing parents will solidify their own skills.

In the Middle Ages

Around junior high school age is where investing should come into the education process. Kids could start setting money aside in, say, a custodial account. Maybe the incentive is for the parent to tell the child if they invest properly and make money, then, it is theirs to keep. If they invest poorly it is okay, but, they must write out what the learned from the experience. At this age some interesting stocks for the young teens may be in McDonalds, Coca Cola or Adidas. These stocks would have a connection for the child. As you go through the annual report with them the child begins to notice more and more. Disney is another stock children can get, relate to, and become excited about. Parents must emphasize to a child that it is okay to make a mistake when investing the first time. Above all the kids must learn that investments are volatile.

The Later Teen Years

As the child becomes a high school senior, send them to the website www.feedthepig.com for tips on how to save money and to receive a weekly email. In addition, there are courses that would be helpful like AIG’s “Kids Investing for Dollars and Sense” (KIDS). It has work sheets and internet based activities that parents can review with their children.

Parents, along with their financial advisor, should begin conversations with the child about what a 529 Plan is and the impact on their life. This is the time a serious discussion of debt, how to keep a budget, and why it is important to stick to it.

As the college years are coming to a close, this period is a time to emphasize that money is not just about spending. Explain what and how a 401K plan works. Share with them that $100/month saved from age 25 to 65, earning the stock market average rate of return will produce $1.2 million for retirement. (Don’t you wish your parents taught you that little gem?)

A Few Closing Thoughts …

• As a young child, my Dad made me read … The Richest Man in Babylon by George Clason. It was a turning point for me in money management. I encourage all my clients to read the book and have their children do the same. If the kids are young, then the parents should help them read and understand the great principles in this great book.
• I work with each client to set them up a “Family Empowered Bank”. This is not a chartered bank, but rather a place where we accumulate and store financial assets, human assets, and wisdom assets. These assets are to be shared with all family members. You see it does you NO good to “dump fish” on the kids … better you teach them “how to fish” with everything you have learned in life. A great financial tool used in the family bank is that as the kids request and want money or things – DO NOT GIVE them the money … lend it to them from the family bank at a reasonable interest rate. Have them pay it back out of allowance or from wages. This exercise will teach them about debt early in life and responsibility.
• Here are a couple of websites that provide information on money camps and instructions for kids on money.

Money Camps, Inc.
www.moneycamps.com

The Money Camp for Kids
www.themoneycamp.com

Independent Means Inc.
www.independentmeans.com

The American Dream Planner
www.americandreamplanner.com

I encourage you to discipline your children with money early, or, later live in regret.

My philosophy has always been, is now, and always will be…Discipline or regret. That is true in wealth building, keeping healthy, a spiritual outlook, raising a family, in fact, with everything in life. I watch how young people, just starting off in their work career, do not have the discipline to save and invest. Consequently, in their late 50s they get into exotic, wild, get rich schemes and betting the lottery trying to make a “big kill”. In all cases these hair brained ideas turn out to be losers and the people are penniless as they approach retirement. Side bar: In a similar way I watch on TV as they advertise… “Lose 30 pounds in 2 weeks”. That action requires some drastic lifestyle changes. Sure, you may lose the weight, but, once you are down “30” pounds you return to your old lifestyle and put it back on. If you follow a slow, disciplined change in your eating and exercise habits to a correct lifestyle you will slowly lose and keep the weight off. Funny, it took you 3, 5, or 7 years to slowly put on the weight, so, why not take the same time to take it off. “Paul what are you crazy” you ask. I’m an American and it’s my “right” to demand:

• A headache to go away in 5 minutes by popping a few pills
• My hunger to go away in 10 seconds by eating fast food
• I lose the equivalent of 2 large dogs in 2 weeks

[I could go on and on…]

Like losing weight, if you follow a slow, disciplined approach in investing, you will win.

Let’s look at a few strategies to build your wealth. After many years in the financial advisory profession, I have found a few simple steps to reach the “top level”.

• (Obvious but ignored) You must spend less than you earn. (I can hear your heart rate go up and you are going to shut down this blog article. Right?) I have seen people who earn $40,000 a year save $5,000 of that for the future. I’ve seen others that earn $200,000 a year and spend $220,000. Why? The more people earn…the more they spend. I have seen individuals worth over $50 million spend more than they earn and systematically destroy their fortune. Thus, Rule #1- spend less than you earn.
• Our second step is to commit to and follow a sound, long term investment strategy (I know for most Americans long term is the time it takes to switch TV channels on their remote control).

Too many people invest a little here and a little there. They bail out of the stock market, after it tanks, and get in after is peaks. Or, they buy real estate after it has a great run up. Worse, they invest in all the “get rich” schemes on late night TV.

The “follow the newsletter trend” is a recent doozie. Many investors place their money into those investments that were last year’s winner. [Evidence shows, over the long term, that the “hot” investment last year is this year’s “cold” one, and, vice versa.] This seems on the surface like a great idea, as you follow the advice of a proven winner…wrong! Plus, following a winner makes you feel good- wrong again. This is not about feeling…it is about making money.

The problem is most “feel good” decisions, in the investment world, do not work out. According to the “Hulbert Financial Digest” if you had taken $1 million, in 1985 and, followed the brilliant newsletter investment strategy for the next 21 years, you would have a grand total of (drum roll, please) $365 today. This is an average loss of 31.4 % per year.

In conclusion, that which may be emotionally and intellectually appealing, like the newsletter strategy, simply does not work.

What are the keys to a sound strategy to build wealth? Well, a successful investment strategy must:

• Work over different time frames
• Provide effective diversification
• Work in both up and down markets
• Be disciplined yet flexible
• Reduce risk and provide down side protection
• Have a good long term track record

The rest is to have patience, self control, patience, and more patience (Ah, patients, said the doctor to the nurse. Ooh, bad pun!)

So, spend less than you earn, commit and follow a strategy, be disciplined and have patience.

Ah, discipline or regret?

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

Interesting Tidbit

MORE THAN HALF

Although only 1 in every 38 tax payers (3%) reports an adjusted gross income of $200,000 or more, that group pays for 51% of all federal income taxes.

So, 3% pays 50% of taxes. Is that a fair tax?

(Source: IRS)

A gaggle of new financial Websites claim that a combination of social networking and informal transaction logs will help you build a winning strategy in less time than paper methods or even programs like Intuit’s Quicken (www.quicken.com) and Microsoft Money (www.microsoft.com). After examining a dozen such sites, my response is: maybe some day.

Few of the newcomers offer real portfolio management — and none on the scale that Quicken and Money have provided reliably for years on both PCs and the Web. Coincidentally, both multi-product families have just been refreshed — the versions with full portfolio management include Quicken Premier 2008, Quicken Home & Business 2008, Microsoft Money Plus Premium and Microsoft Money Plus Home & Business. They list for $80 to $100, but they’re always heavily discounted.

Although these systems include just about every known financial-management tool, the primary reason to buy them is their ability to download multiple transactions from multiple accounts at multiple institutions for millions of customers daily with nary a hiccup. In fact, all your accounts can be updated in one step. That’s an underappreciated accomplishment, one that even large online brokerages like TD Ameritrade (www.tdameritrade.com) and E*Trade (www.etrade.com) aren’t inclined to tackle.

Both software programs are packed with performance measures for your entire portfolio and its individual holdings over any period you choose — about 100 different ratios and other metrics. Both come fully equipped with tools, charts and reports that aid in cash-flow management, risk analysis and asset allocation. And both have customizable calculators, guides and reports to help with portfolio rebalancing, retirement planning and capital-gains and other tax estimates.

Okay, but isn’t one better? Not really. One pea has more wrinkles on the left side; the other, more on the right. Certainly, the quality of news and analysis on MSN Money is a cut above Quicken.com’s. Yet one of my favorite tools is Quicken.com’s Stock Evaluator, a discounted-earnings (as opposed to discounted free cash flow) tool for finding a stock’s intrinsic value. It lets you examine a company’s growth trends, financial health, management performance and market multiples.

Your decision to buy Quicken or Money will probably turn on which feels most comfortable to you. In fact, their strengths are also their weaknesses: They’re so loaded with features that they can overwhelm the casual user. That’s the opening the new social investing-cum-budgeting sites seem to want to exploit. By mixing just a slice of personal finance functionality with plenty of yak for free or a low monthly fee, they may be able to gain a toehold in the marketplace. Most don’t merit mention.

One of the exceptions is Yodlee MoneyCenter (www.yodlee.com). It’s not as broad or deep as Money or Quicken, but has all the key modules, including a portfolio manager that accepts downloads from brokerages and other financial institutions. Yodlee’s portfolio can be customized with a decent set of performance measures like those most professional money managers use.

Not surprisingly, the company is a well-regarded Redwood City, Calif.-based electronic-payment intermediary that also provides a financial-services platform to 100 big banks and portals. A free service, the Yodlee Website mounts one of the few credible challenges to Quicken and Money.
Another worthwhile site to check out is MoneyChimp (www.moneychimp.com). It lacks electronic data updates, but does a good job with ad hoc portfolio analysis via a battery of financial calculators and supporting articles covering everything from the Rule of 72 to Monte Carlo simulations. The site is clean and navigable — sort of a Reader’s Digest version of The Motley Fool (www.fool.com). The major caveat to interesting sites like MoneyChimp is that you have to keep typing in data from somewhere else.

Go ahead and hop on MoneyChimp for a quick simulation of your retirement options. But if you want more substance, you’ll need at least one site or program that updates all your accounts quickly and easily. For now, that will lead you back to Quicken, Money or possibly Yodlee.

A. Why People Succeed or Fail
Parkinson’s Law is one of the best known and most important laws of money and wealth accumulation. It was developed by English writer C. Northcote Parkinson many years ago and it explains why most people retire poor.

B. The Way the Law Works
The law says that, no matter how much money people earn, they tend to spend the entire amount and a little bit more besides. (The proof is if you have outstanding credit card bills.) Their expenses rise in lockstep with their earnings. Many people are earning today several times what they were earning at their first job. But somehow, they seem to need every single penny to maintain their current lifestyles. No matter how much they make, there never seems to be enough.

C. The Key to Financial Success
The first corollary of Parkinson’s Law says: “Financial independence comes from violating Parkinson’s Law.”

D. Parkinson’s Law explains the trap that most people fall into. This is the reason for debt, money worries and financial frustrations. It is only when you develop sufficient willpower to resist the power urge to spend everything you make that you begin to accumulate money and move ahead of the crowd.

E. Slow Down Your Spending
The second corollary of Parkinson’s Law is: “If you allow your expenses to increase at a slower rate than your earnings, and you save or invest the difference, you will become financially independent in your working lifetime.”

F. This is the key. I call it the “wedge.” If you can drive a wedge between your increasing earning and the increasing cost of your lifestyle, and then save and invest the difference, you can continue to improve your lifestyle and make more money. By consciously violating Parkinson’s Law, you will eventually become financially independent.

Increase Earnings

Savings

Keep Expenses Constant

G. Action Exercise
Here are two things you can do to apply this law immediately:

· First, imagine that your financial life is like a failing company that you have taken over. Institute an immediate financial freeze. Halt all non-essential expenses. Draw up a budget of your fixed, unavoidable costs per month, and, resolve to limit your expenditures temporarily to these amounts. Remember you can rationalize everything as a fixed expense. Clothing and entertainment are NOT fixed expenses. Here’s a trick…. Make believe you lost your job and NO money is coming in….. Now what expenses HAVE to paid to survive?… Hmm! What happens to Cable TV?… It changes from a fixed (I need to survive) expense to a variable (I want it) expense. You see the problem is “Need versus Want” How much vacation or pairs of shoes do you need versus want. I am not saying you must go on a diet of “franks and beans.” Look at the things you “want”… write them out on a list, but budget for them, and then when they go on sale, consider buying. Say you “want” a new set of towels for the bathroom…. “White sales” are twice a year. If you have to buy them, then get them on sale. Trust me the toilet, bath tub and your guests do not know you got them on sale. And, if you did “SAVE” money on the purchase, then, physically take the amount you “saved” and place it in your investment account. Otherwise, you never really “Saved” the money.

· People tell me they can not save 10% of their income. If your taxes go up 10% (which they will) you would learn to live on a lesser take home. So set aside a MINIMUM of 10% of your gross income to savings/investing. By the way this 10% does not include any money set aside in a 401K or company plan, which is additional and separate. So I am saying live on 90% today and save 10% for tomorrow. What do most people do with a raise or bonus before they get it? Spend it. That is what losers do. You are NOT a loser. You are a winner. You never had this raise or bonus anyway, so, by saving 90% of the raise or bonus, and, spending 10%, then, that is still 10% more to spend than you are currently spending now. (Or do 80%-20%)

H. Carefully examine every expense. Question it as though you were analyzing someone else’s expenses. Look for ways to economize or cut back. Aim for a minimum of a 10 percent reduction in your living costs over the next three months.

You see it is not how much money you make that counts… it is how much you keep that counts. This is what the wealthy do! What did mom and dad teach me… if you want to be wealthy do what wealthy people do…if you want to be poor do what poor people do…DUH!

Stop and look at how much you have earned from your first job until today…what do you have to show for it? The way most people handle their finances; well, if they were the leader of a large company, and, handled the company’s money the same way… they would be prosecuted for misappropriation of funds. You are the President of your own company…called You,Inc. Then, act like a President.

Let me know the little “savings” tricks that have worked for you in our comments section.