This booklet from author and success coach Steve Chitty was created for entrepreneurs, freelancers and everybody else who are earning good money but still struggling to keep their heads above water. The booklet contains five simple tips that will help you gain more control over your finances. (PDF file, 25 pages, 332 KB)

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Unformated preview of the document: '5 tips - secrets to help you bank more money' (Part 4):

it needs to be regular. It's also up to you to decide what method you
use to track your financial performance. Some like the latest software or online
accounting systems, others use an Excel spreadsheet and some prefer the
humble pen and paper. Again it's up to you, the main thing is that you know your
score and enable yourself to make educated improvements. If you wait until the
end like the gymnast it may be too late.
© Steve Chitty 2011
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Summary - The Keys to Knowing Your Score are
- Do it regularly so you can adjust your earning and spending habits (you
can't manage what you can't measure).
- You must know…
o EXACTLY what you earn – can you make this grow?
o EXACTLY what items you spend your money on. What expenses
can you trim?
o Your net worth – is this growing or shrinking? What do you need to
do about it?
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3. Create a System that Tells Your Money Where to Go
"A Budget is telling your money where to go instead of wondering where it went"
– John C Maxwell
To keep more of the money we earn we will need a predetermined 'system' that
dictates how our money is divvied up every time we are paid. An effective
system will empower us to;
1. Give money to causes we believe in (if this is important to you)
2. Put aside money for our self and our family's long term financial growth
3. Allocate money for our living expenses
Financial author John Burley calls this system an 'Automatic Investment Plan'
(AIP) – it is automatic, it invests in your long term wealth, causes you believe in
and your daily living, and it is planned.
How does it work?
· It is a calculated 'set of rules' that tells your money where to go.
· It stops your emotions determining how your money will be allocated (or misallocated).
· It calculated carefully on history and set into a fixed payment plan (this is why
we must keep track of our score)
· On pay day it is done automatically without debate or contemplation. Do it…
then think about it!
A workable, effective and successful AIP will allocate our income either by set
amounts or by percentages. The set of rules you decide on will be unique to
your situation and will take into account;
ı The balance between how often you are paid and how regularly your
expenses go out (your cash flows)
ı How much you are paid in relation to your expenses (your margins).
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ı The financial growth you wish to experience (your savings and investment
goals)
Let's look at two different scenarios:
Example one, if your income comes in like clockwork (e.g. the same amount
every week, fortnight or month) your AIP will probably work best using fixed
amounts of money. Let me introduce you to Bob and his financial situation.
Bob is a salaried employee earning $52,000 (after tax) and he is paid
$1000 in his hand every week. Bob believes strongly in the community
work of his local church so he commits 10% to that work, he is serious
about building a nest egg for his family so he commits 10% of his income
towards this. Bob's family expenses are $800 per week.. Bob's AIP might
look like this…
Bob has a predictable income which makes it is easy for him to allocate his
earnings in fixed chunks of money every week. Bob is smart and has even set
his AIP to operate by automatic payments so that every week his income is
allocated to the right accounts without him even thinking about it.
Example two, now let's look at Kelly who earns an irregular income through
commission based sales. Kelly operates her Automatic Investment Plan using
percentages as can't be sure whether she will be paid weekly, fortnightly or
monthly. However she knows that she earns an average of $52,000 a year (after
tax). Kelly supports the local foodbank and like Bob is serious about saving for
$1000 (income)
$100
(Giving) $100
(Savings/investment)
$800
(Living - Short term
savings, food, power
phone, etc)
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her future. Kelly can also run her family on the equivalent of $800 per week.
Kelly has worked out her AIP into percentages and has decided to pay herself
every month. Each month Kelly leaves a calculated amount of money in her
business account for tax and expenses and then pays herself. Her AIP might
look like this over three months.


Unformated preview of the document: '5 tips - secrets to help you bank more money':  Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7, Part 8