My first experience with money management came during my 8th grade year of junior high school. I attended a private Christian school, and part of our 8th grade class activities was a trip to the East coast for the week. We’d fly from LA to Washington, DC. From DC, we’d take a bus to Philadelphia. After that, we’d take that same bus to New York, New York.
Prior to this trip, the farthest I had been from home was Atlanta, Georgia, and that was with supervision. For this trip, it was me, myself and I, along with a few classmates and teachers.
This was 1998, and my school recommended each student brings no more than $200 of petty cash to spend on gifts and others goods (we had already spent the whole school year selling dinners to raise to bulk of the funds to finance the trip). Once my mother heard their suggestion, her plan was to give me that exact amount to take on the trip with me.
That was until the day of the trip.
Back in 1998, you could go inside the airport to send your party off, which is what my mother and family did on this day. However, right before I was about to board the plane, my mother pulled me aside and gave me her debit card. She instructed me not to lose the card or tell anyone the pass code. And vaguely said stick to 200. I was expecting cash, but she gave me the plastic.
So there I was, 8th grade kid headed to the east coast for the first time with no sense of financial responsibility. For the first time in my life, I felt in control of my own world. I had the power to buy whatever shiny toy I laid my eyes on. Nike shoes. Nautica coats. Knock off watches. You name it. I was buying. I spent more time looking for ATM’s than actually enjoying the trip.
Needless to say, I pretty much bankrupted my mother’s bank account. I spent money as fast as a New York minute. Everywhere we went, I had to buy something. My spending got so excessive that my mother found some way to get in contact with my teacher – this was before EVERYONE had a cell phone – to tell me to stop spending money. And if she hadn’t, my mother would probably still be paying overdraft fees to this day.
So what’s the moral of this story, and what does it have to do with money saving tips?
Well, it’s simple.
First, don’t give people – especially kids – who have never been trained to manage money easy access to money via a credit card and/or debit card that you can’t manage. Do yourself a favor and teach your kids how to manage their money, or yours for that matter. You’ll be thanking yourself in the end. Resist the urge to approach money as a taboo subject and be open about your finances with your kids. Let them know what they will have to grow up and inevitable do for themselves.
Second, when it comes to saving money, take a page out of the book of Jim Rohn and implement what I like to call his 7030 Money Management Formula. It’s a great way to save, invest, and spend the money you earn from your job and investment portfolio. You’ll be amazed by the compounding effect of your efforts as time goes by.
Here’s how it works…
Whenever you receive money – whether it is earned or passive income – divide it up into these proportions:
- Allocate 70% for Necessities: money used to pay bills – rent, utilities, insurances, food, clothing, fun, etc.
- Allocate 10% for Charity: money used for a worthy cause – tithes, foundations, etc.
- Allocate 10% for Active Capital: money used to make a profit via an enterprising business entity
- Allocate 10% for Passive Capital: money used to let others pay you interest
Lastly, and this one is a personal challenge, use income from your necessities to build some “sack money” via the 52-Week Money Challenge.
That does it for today.
Remember: you can have all and be all that you want in this life as long as you believe you deserve it, and then you’re will to put effort into attaining your goals and accomplishing your objective. Now that you have a new or refreshed perspective on saving money by improving the quality of your money management system, you should be swimming in paper and coins like Scrooge McDuck in no time!