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.