In order to build wealth you have to understand the “Fundamentals of Money Management. This will begin with understanding where your money goes. If you don’t know where every penny of your money goes, someone else will and they will do anything to separate you from it.
Question: How does one go about finding out where all their money goes?
Answer: Doing a “Spending Personality Assessment” (SPA) Review
Step 1: Write out a preliminary budget (everything starts with budgeting). Believe it or not, the riches people in the world started with a budget (along with some significant risks taking).
Step 2: For the next 45 days you will collect a receipt for everything you spend money on. It does not matter if you go to an ATM for cash (if you buy something, collect a receipt for it) or use a credit/debt card.
Step 3: After 45 days use the receipts to make a final budget and compare it to the preliminary budget you did at the beginning.
Step 4: When you do the comparison you will find out how your spending habits match your personality. The old saying “you are what you eat” is true. Your personality is a reflection of your financial spending. It is your spending personality.
I have taught students to do this since 1998 and it works 100% of the time.
If you are disciplined enough to start and finish the “SPA Review”, you will only need to do it once.
Now that you know where your money go you can plan for the things you need now and save for the things you want in the future.
Tomorrow I will talk about the difference between “Saving and Investing” and how you can use income tax reduction strategies to build wealth.
Until then, Happy New Year!!!
Robert L. Woods (a.k.a R. LaMont W.)