2006 Strategy: Keeping My Money

2006 Strategy: Keeping My Money

NOTE: this entry is the second part of another article: Converting Resolutions to Actions

I did a poor job of managing my finances in 2005, and have racked up way more credit card debt than I anticipated. So I am instituting a recovery plan for 2006.

The basic problem comes down to doing regular financial accounting. Without it, you’re dead. It’s not one of my favorite things to do, as I find data entry tedious. At the same time, I really have no idea how to use an accountant. The business of money was never discussed even tangentially in my household growing up, and the idea of using professional services was a foreign concept. I’m still a little amazed today at how little I know about managing the details of my life. I imagine that people who don’t understand how their computers work feel the same way when they stare at the system control panel. So that’s what that feels like!

I’ve been doing a lot more reading about personal finance and business, trying to get a better “feel” for what the essentials are to help define my Printable CEO goals in terms of making money. Turnaround is achievable if I stay focused.

  • Book the Work — If I don’t have money coming in, I’m pretty much dead in the water. So booking projects and doing constant new business development work is an essential activity for 2006.

  • Be Frugal — Spending less money than what you receive results in a net profit. I had been spending money in excess of what I was earning, with the vague notion that when “business picked up” I would be ok. Well, that’s a stupid attitude, and I’m paying a nice chunk of interest on my consolidated loans. It’s a crappy place to be, and I wouldn’t be here if I truly understood the nature of keeping tabs on spending.

    A related change is to reduce my base cost of living. I’m buying more vegetables like cabbage (cheap, filling, and healthy). I’m also buying less expensive cuts of meat; I had no idea how many chicken drumsticks you could buy for 4 bucks before. There are also an impressive number of canned and powdered foods that taste pretty good if prepared correctly. I’m considering dropping cable and Tivo (I know, gasp!) and switching over to Vonage or Skype for long distance. I’m turning off lights and lowering my thermostat to 60 degrees. In a way, this is kind of an interesting homage to my parents when I was a kid. As a young pastor of a small country church, Dad didn’t bring in a lot of income, so Mom would spend very carefully. I remember eating a lot of frozen corn and chicken hot dogs growing up, and I used to hate it. On the other hand, it’s cheap. Another friend of mine tells me about his grandparents, who were poor and had to scrimp and save to send their kids through school. Now they are such champion savers that they go to the supermarket for sport. Armed with double coupons, they selectively purchase groceries with such prowess that the supermarket owes them money when it’s time to check out. They’re my new role models :-)

  • Stick to the Budget — Budget? Well, I have one now. I’m making do with last year’s hardware and last year’s versions of software. I’m looking at what I’m really spending per month and again, eating a lot of cabbage. Mmm…cabbage! Tastes like money in the bank :-)

  • Reduce Debt — As quickly as possible, so I don’t lose more money to interest payments and can start saving money for a rainy day.

  • Follow Your Money — In the past, I used to keep very loose track of what I was spending, but never looked for trends. I had no idea I spent so much on groceries, for example, or that my book spending was so needlessly high. Now I’m entering in purchases the day I make them, categorized by type in QuickBooks, so I can see what I’m doing. At least, that’s the theory…working out the rhythm.

  • Follow The Money — This is related to knowing where your money comes from, and where you can get more. So I may know I’m getting paid from client A, but where is he getting his money from? And why? Getting closer to the source of money is more likely to yield more lucrative opportunities.

  • Develop Assets — Assets are things that have true value. Great assets will generate passive income just by sitting there. If something actually costs money on a regular basis, that’s not an asset. It’s a drain. Houses, for example, are not really assets because they don’t generate income. Anything I can do to create something that brings in money while I’m sleeping is a good thing.

  • Don’t be a Mooch — It’s important to me to figure out how to turn the situation around by myself. Relying on subsidies from the outside (other than what is due to me as a citizen) is not a personal option. However, doing something in trade for money is a different story entirely, so I want to seek out more of those opportunities.

13 Comments

  1. Rhawbert Costa 14 years ago

    I´ve been around for a while, and I kind of like here pretty much indeed…

    As a first time commenter (since the first P.CEO´s post) this time I think I could help some way (or not).

    In 2005 I´ve passed through all this… unemployed since 2003, starting my own design studio (with 3 others fellows/partners).

    Ended up with no money for food, neither for the transportation… got a bike, ride it everyday, commuting and to work at the office. Yes, I´m self-employed and business were doing slow (at least in Brazil´s center-east), had no other source of income. Got a waiter job at night for a couple of months… and them I said “Enough!”.

    How is it possible to be so “avant gard”, so much technology stuff around and knowledge as well and I can´t have a decent meal?? ooo.. common… blah, blah, blah

    Was writing a book, canceled. Due to the delay it could be to return some profit.

    Was preparing a series of small courses, canceled it too. Got no money to rent some space for the classes… and NO way I´d got into loan.

    I was not alone, all other three partners were at the same boat, and the way out was the most stranger one: everyone has to got a job.

    Ease? no.
    Healthy? not aways.
    Needed? sure.

    The feeling that this was the end of all we´ve build was in the air, and it stinks.

    Some good points:
    Everybody started to think clearly;
    Everybody was happier;
    The office was self-paying;
    Stopped making free stuff “just for portfolio”;
    Find some target-market;
    Built some niche market as well;
    Promote design philosophy (locally) more often;
    Increased/improved production;
    Better production = better clients, we managed to get some clients abroad;
    Better client selection (started to found out some were harmful);
    New hardware, installations reformed;

    Some bad points:
    No one receives a dime from the work done at the office;
    Almost zero social life;
    Pain/stress/tired all the time;

    We feel like a phoenix, but the battle keeps going on and now that there´s money to control (which is good :D ), I need to perform a good job, saving for the unknown future. Some of my discovers:

    I had to find some software to control exactly what and how much I spent with, the best one I´ve found: iFinance. Coz I needed it cross platform (Mac and PC). More info: http://ifinance.de/

    Now (after six months) with a full time job and a office to run, that´s 14 hours work journey, I started to forget everything, to get unreachable, and was losing control of my finances, coz I had no time to the boring data entry at the desktop.
    Bought a Palm, the cheapest one, Zire 31, it does the job, with no-fancy-time-consuming-Gad-gad-amusements (read: games). http://www.palm.com/us/support/zire31/

    Now I´m trying, successfully, the best Personal Finance Manager that suits my needs: SplashMoney. http://splashdata.com/splashmoney/

    Hope it helped, keep the good job here and good luck.

    ——-

  2. Emily 14 years ago

    Well, maybe that’s how “cabbage” became a slang term for “money.” ;)

  3. Rory 14 years ago

    60 Degrees on the thermostat – so my wife and I aren’t the only ones that figured out blankets and sweaters purchased one time are much cheaper than a huge gas bill.

    Developing assets is a great point to bring up.  As a freelancer you don’t have the built in opportunity for 401K or other retirement savings options available to employees in the corporate world, you actually have to go out and find these products.

    Great article – good luck on your budgeting.

  4. Dave Seah 14 years ago

    I didn’t know that “cabbage” was slang for money!!! Neat!

  5. Dave Seah 14 years ago

    Rhawbert: THANK YOU for sharing that story about your experiences with everyone. I’ve been thinking, “hmm, maybe I should get a job” as well, but I perhaps have been too stubborn about it.

    I had come to the conclusion previously that there’s a strong sense of authorship that I need to have in my work, but I may be deluding myself. It could very well just finding the right work environment. Any thoughts on that?

  6. Rhawbert Costa 14 years ago

    Actually yes, regarding authorship…

    When you´re self-employee you suppose to have your own rules, and many times as “creatives” usually do, the only rule they think they should follow is “no rules at all”…

    When you´re an employee you get forced to be passive, to wait, to follow, not to lead, neither argument or ask.

    My opinion is that people are romantic, not stubborn, both paths can make you a living but, at the end all that matters are the ways to make it (this means all you´ve passed through to get stuff done).

    You can work for yourself and feel like crap, or you can be exploited by someone else and live quite well with it…

    It just feels good when you look back and see a lot of nice jobs done, it doesn’t matter how much you charge your clients, or receives as salary. This is possible to accomplish, been an employee or a freelancer.

    Summarizing myself, I think there´s no problem at been a romantic… I´ve been it all the time, it helps to keep me sane. :-)

  7. Bronwyn 14 years ago

    Your new mantra should be “Never spend money you don’t have yet.”  Thank goodness my mother taught me that—that’s what’s kept me solvent all this time.  I’ve been living on a shoestring for quite a while now.  It’s no fun, but it’s much better than debt.

    <ul>
    <li>Cut back as much as possible on all recurring costs.  Bye-bye cable and tivo. </li>
    <li>Stop buying entertainment.  Borrow books, music, and movies from your local library.</li>
    <li>No more eating out or prepared foods.</li>
    <li>Buying meat with bones means you can make soup stock from the bones.</li>
    <li>Use eggs, tofu, and legumes for your protein.</li>
    <li>No more new anything unless it breaks beyond repair.  Check out Freecycle and second-hand shops when replacing things.</li>
    <li>Buy cheaper personal care products.</li>
    <li>Compare generic to name brands when shopping —often you can get something just as good for less.</li>
    </ul>

  8. Rory 14 years ago

    Setting the thermostat to 60 degrees – I glad to see my wife and I aren’t the only ones that have found blankets and sweaters bought one time are much cheaper than a huge gas bill.

    Those are also good points about assets!  As a freelancer you don’t have the built in retirement savings tools that are available in the corporate world – 401K, pension, etc.  Those are things you have to make a point to go out and find yourself.

    While you may feel like you don’t have the money now to start saving for the future, every little bit will help.  If you don’t want to start a retirement type package just yet, then look around online and find a savings account or checking account with a really good interest rate.

    Good luck on your budget!

  9. Dave Seah 14 years ago

    Thanks for the encouragement, all! I’m feeling more renewed and ready to cancel that cable/tivo, switch to vonage, etc.

    That point about getting a job, I just realized, can work in a couple of ways:

    <ol>
    <li>When you get a job, you’re not longer the boss and have to do whatever you’re told, pretty much.</li>
    <li>If that’s the case, what’s stopping ME from doing that to myself?</li>
    </ol>

    In freelance terms, it means taking on the jobs that I otherwise pass on to others, and learning to cope with the workload. So duh! This changes a lot!

  10. Matthew Bennett 14 years ago

    Hello David,

    I’ve been reading your blog for a while now and this is the first time I comment.

    Have you heard of or read any of Robert Kyosaki’s Rich Dad, Poor Dad (http://www.richdad.com/)series?

    I have been thinking about and trying to solve many of the small problems you have mentioned in your post for a while now and have been reading lots of ideas about how best to go about things.

    Reading Rich Dad, Poor Dad this weekend has really opened my eyes to many things about money and making and keeping more of it.

    Saludos.

    Matthew.

  11. Dave Seah 14 years ago

    Matthew: Yes, someone recommended it to me (it might have been Brad) and it did open my eyes in terms of how to think about money! Some of the key ideas that I remember are working for opportunity, having assets working for you while you sleep, and what wealth really means. A lot of great ideas in it!
    Have you had any success in applying any of the tips? I’m curious!

  12. Mike Brown 14 years ago

    Well, check out the Wikipedia entry on “Rich Dad” [1] and note the external links at the bottom, esp the skeptic’s site.

    Slate.com also had a rather skeptical article. [2]

    I skimmed the book and he has some interesting principles to keep in mind. (Do you want to be a “best-selling” or “best-writing” author?) But I’m not interested in real estate as an investment and the lack of specifics (unless you buy his other books and materials) makes me skeptical.

    [1] http://en.wikipedia.org/wiki/Rich_Dad,_Poor_Dad

    [2] http://www.slate.com/id/2067175/

  13. Dave Seah 14 years ago

    Hey Mike: Awesome links! There are two reasons I liked Rich Dad Poor Dad: the idea (neatly encapsulated in the Wikipedia article) and the story-based approach it takes. It otherwise does have that snake-oil sheen to it and is about flippin’ real estate :-)

    For me, the idea that I wasn’t buying or creating “assets” was the revelation; the story approach allowed me to understand the difference. Whether or not the book is made-up, has credible step-by-step advice, or is even well-written actually wasn’t that important to me because I got the IDEAS I needed from it. And I don’t turn up my nose at any idea, no matter how skeptical I might be of its source. Good ideas can come from anywhere.

    It’s good to be reminded, though, that I should keep that in mind when I recommend books. With Rich Dad, Poor Dad, I can just point them to the wikipedia article now…thanks! I need to look up my other favorite business “idea books” there now!