Principle 13: Develop a Written Budget and Evaluate it Every Month
A person should create a monthly budget that it simple to follow and track. The principle that underlies the development of a budget is that every month, more money must come in than that which goes out. Indeed, there is no other choice as a person cannot spend more than he/she makes. Budgeting enables one to gain financial security in the long run. On that account, budgeting is broken into three steps. The first is developing a budget which entails listing all expenses and income to accommodate them in the budget. Second is tracking of the budget. This step is whereby in the first day of each month, a person summarizes his/her performance using last month’s budget, and preparation of that month’s budget. By doing this several times, the concept of managing the personal budget will sink in. The last step is analysis of the budget. One should examine the budget to determine where he/she is performing well and where he/she is not. This will enable one to make the required changes to enable him/her to save more money.
Principle 12: Execution of an Annual Financial Physical
The author asserts that an annual financial physical should be accompanied by a goal. In the author’s case, the goal was to get out of debt and never owe money to anybody. The key to achieving a financial physical is starting early since there are some people who never do such an exercise at all. It is important since it is the foundation of what everyone does in his/her financial life. To that extent, one needs to have a starting point each year. The author suggests that the best time to do this exercise is December. The exercise is simplified if one has been engaging in monthly budgeting. It enables one to come up with a net statement for that year to enable the forecasting of a statement for the next year. These processes will enable one to realize financial health.
Principle 15: Save or Invest Half of Every Salary Increase
Whilst this concept may seem simple, it is hard to follow unless one has discipline. To achieve this, one simply has to reason that he/she was living on the old salary before a raise; therefore, the increased income will enable one to have the best of both of worlds. The main reason why people do not achieve this step is because they fall behind in the first place by spending more money than they make. If one does not fall behind from the start, then this plan will be easier to execute. Indeed, adhering to this principle will enable a person to stay ahead of the game. If a person does this each time he/she earns a raise, he/she will find him/herself eventually saving a significant amount (more than 50%) of his/her income and investing in the future. The author believes that this was the most important idea that he learned in business school as it has guaranteed him financial security.
Principle 16: Save 90% of Every Bonus or Non-Planned Income
This principle builds on the foundation set by the previous principle. The author asserts that a quick way of finding oneself in financial trouble is by planning the bonus into one’s lifestyle. Since bonuses are not guaranteed income, they should not be used to plan for an enhanced lifestyle. On that account, one should treat the bonus as if it is a wonderful surprise at the end of the year to enable him/her to save most of it. The key thing to remember is that since a person was not planning on getting any bonus, then, it is actually a plus. The principle is also applicable to unexpected income, which one should use to get ahead financially. The combination of this principles enables one to plan for long-term financial goals by not going into debt and living below one’s means.
Principle 17: Comprehension of Employee Benefits since They are Worth A Substantial Amount
One should go over the employee benefits and take notes about the clarification that he/she needs. Then, one should plan a meeting with a senior HR representative to ask the questions that will enable one to gain insight about the employee benefits. One should insist a meeting with a senior HR worker since this person has a more comprehensive understating of the benefit plan than an entree-level employee. He/she should dedicate his/her time to learn and comprehend about the features of the plan that apply to him/her. If one manages these benefits effectively, they will facilitate him/her with a substantial amount in terms of benefits across his/her entire career.
Principle 18: building an Emergency Fund
One should develop an emergency fund into his/her budget. As the years pass, one should make sure that he/she increases the amount allocated to it. The basis of this principle is that something may go wrong in one’s life, therefore one should have funds to pay for it. Similarly, something may go right and one will have the money to enjoy it. There is a wide scope of emergencies that people encounter in the course of their adult life. Whereas it is hard to have a large emergency fund in early adulthood, one should make sure that he/she budgets for one and increase it as one grows older. Performing this will save one form stress and headaches centered on money.
Principle 19: creation of an Emergency Month Every January
One should have a month where he/she cuts down spending to fundamental essentials. One should have the mindset that he/she has next to nothing in regards to money and survive for that month. This method works since it demonstrates to a person how hard or simple to do so. It enables one to rank his/her priorities. It is also an excellent one time to review the utility bills to find out if a person is getting the best deal. Not only does this principle enables one to save money for that month and change the long-term spending habits, it enables one to get in touch with his/her financial reality. The author frames it as an expense loss program as it resembles a weight-loss program.
Principle 20: Embracing Coupons
People should change their mindset that coupons are either hard to use or the belief that one looks cheap if he/she uses a coupon. To that extent, the author states that it is outstanding that less than 3% of people use coupons considering the amount of savings they enable. Coupons enables the author to save over $50 a week. One simply has to search the internet for coupons and chances are high that he/she will save money. Overall, one should not be embarrassed to use coupons since using them wisely will enable one cater for another utility bill.
Principle 21: Shopping Around for Discounts on All Services and Products
One should take advantage of the internet to compare prices. If one finds a better price that is far from his/her location, then he/she should call the local store manager and inform him/her about that finding. One should always look at two or three estimates and balance them off to find out which is the most suitable. The time and energy spent on this activity will enable one to save tens of thousands of dollars across his/her lifetime.
Principle 22: Ensuring that Rebate Offers are Mailed in Immediately After Purchase
The author believes that it is surprising that many customers do not redeem their rebates. On that note, he suggests that one should send in a rebate for any item worth over $5. Over time, these rebates will enable one to save a significant amount of money.
Principle 23: Having a Spending Versus A Spending Mindset
Once one places focus on saving, he/she will discover that it will become a habit and a positive way of living. In the instance, if a person loves to shop, he/she should change his/her mind state to shift to a saving habit. “Spendaholics” lack the discipline to transform their habit and become savers. Further, they like to spend more money than they have. If one changes his/her mindset, then he/she will derive great pleasure from saving in the same way shopping and spending brings joy. On that note, budgets and net worth statement should be scorecards for one’s financial achievement.