Volume 2, Issue 1

Introduction

Now that you have made it successfully through another year we are sure that you have defined the same resolutions to be accomplished in 2009 as you did last year. According to many popular web sites weight reduction, spending more time with family, and reducing debt are among the top New Year’s resolutions of many Americans. Many times you feel that you can control the former two, but the latter one, debt reduction, seems like a moving target. Debt reduction is in fact one part of mastering financial stewardship and many people think that the only way to defeat this enemy is to make more money. But, as many people have found out through the ancient proverb “he who is faithful over little will be a ruler over much”, reducing debt can be accomplished with the present amount of your income! As the true originator of the concept “survival of the fittest” Herbert Spencer essentially states that individuals who “learn” how to be affluent live more socially desirable lives. Is this not true today? This is certainly true of many self-made millionaires who have mastered the philosophy of self-discipline in order to better control their spending habits. They manage to grow their businesses based on their financial resources today. In other words, it is not about how much you make it is about how much you keep. The FACTS newsletter will be dedicated to teaching you this methodology through its very own financial doctrine entitled, “The Financial Life Cycle”(FLC). Journey with us as we will explore some simple steps to put you on the road to success within your personal finances. For those of you who are already driving we will show how to maintain optimal speeds within your present finances.

The Financial Life Cycle(FLC)

The FLC has seven steps which are continuous in nature. They are Budgeting, Protection, Saving and Debt Reduction, Accumulation, Preservation, Distribution, and Transference. Each of these particular steps deal with building a solid financial plan that will maximize your saving and investing, retirement planning, college planning, and even estate planning. We will start off with the first step, which is Budgeting.

Budgeting

For those of you who have attained a significant amount of wealth I am sure that you would like to break down the accumulation of wealth into one lesson; that it is mostly behavioral or mental. One psychological method that has worked for me in the past is applying the concept of running yourself(You, Inc.) like you would a major corporation. One basic premise of a for-profit organization is that its success is primarily based on profit and profit margins, not revenues. What do you think one of the reasons why 9 out of 10 businesses fail? If you do not know what is coming in your household and where it is going you will never achieve even a modest amount of financial success. Putting together a simple Microsoft Excel spreadsheet “prior” to every month, calculating your disposable income(what is left after taxes) minus expenses, is a great start to effectively managing your finances. Before you even pay a bill document your expected monthly cash flow! As one of my mentors put it, sometimes people will end up with more month than money at the end of the month. Budgeting will indeed result in “no” bounced checks and more discretionary income(what is left after expenses) at the end of each month. If you are expecting me to calculate derivatives and complex tax computations for budgeting then you have already missed step number one. Budgeting is very simple, but we will explore more advanced concepts as we journey further down the FLC. The next article will show you how to transition from Budgeting to Protection. Know the FACTS!