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Ben Kingsley Blog post by Ben Kingsley

The Art of Money Management

Hi, Ben Kingsley here. In this How To Session, I want to talk to you about the art of money management. Some might argue that it’s a science but, for me, it’s definitely an art. There’s no scientific aspect to it, but there are some rules that you need to follow.

Most of us have attempted to use a budget before — a very typical or standard budget, where we set up our expense items and target exactly how much they are going to spend. But they don’t work.

The reasons that budgets don’t work is because there are no rules around it — really, it’s just an aspirational thing to say, “Well I’ve got all this money, and I’ve got these things I want to spend it on.” But effectively, there’s no controls or mechanisms around this.

True money management is effectively a rules-based system whereby you can allocate certain money to certain activities.

The best way to do this is to break your money management up into important areas.

So, the first area to get money working for you in this new cashless economy and cashless society is to break out your weekly allocation — your seven-day float — so try and draw out the money you’re spending on a 7-day basis, and separate this money into what we call a “Living and Lifestyle” allocation. Calculate this, and then pay yourself this amount of money on a weekly basis. When you do this, you know that’s what you’re going to be spending every week, and this allows you to trap surplus. And a great money management system, and the art of true money management, allows you to trap that surplus.

 

How do we do that we allocate this extra money out?

All of the other bills and regular payments we have can be paid via a credit card. Why pay by credit card? We do this because we get a 55-day rolling interest free period and this means that our money can sit in our offset account, saving us on our overall interest cost, which is good. Essentially, we’re using someone else’s money— in most cases it’s the bank’s money — on this rolling balance and that’s saving in interest and we’re taking advantage of that. The best way to take advantage of this is you must make sure the credit card Auto Sweeps. When it Auto Sweeps, it means you never ever have interest on the credit card.

So, we’ve got our 7-day weekly allocation and we’ve got our regular payments — now, we need to focus on our irregular or ad-hoc payments.

How we do that is we set these payments into Provisionings. To do this, we have a “Provisionings jar” as part of our Money SMARTS system, which focuses on looking after all these ad-hoc things that we don’t buy/spend on a regular basis. Some good examples of these might be clothing, holidays, donations, furniture and those big, one-off items that we spend our money on. At the start of the year, what you need to do is you need to allocate over a 12-month period what you’re going to spend on those items. With the correct money management system, these items should be the only ones that you track.

There’s no need to track all of your money because most of us don’t do this, and that’s why budgets don’t work.

Realistically, just because you set a target, it doesn’t mean it works.

On the other hand, by allocating your provisioning spend each month and setting it against the allotted amount you had set for yourself over a 12 month period, what happens is… all of a sudden you have a money management system!

It’s no longer a budget — every dollar’s got a job to do, and every dollar has been allocated to perform a task for you. If you get all of that organised, you’re going to be far better at managing your money.

 

To help you manage your money better and to get in control of the art of money management, why don’t you check out our Money S.M.A.R.T.S. Platform? We’ve set this up on The Property Couch website because Bryce and I are on a crusade to help people manage their money better. We want you to get in control of your money, understand where all of it is going and, most importantly, trap that surplus. Because it’s the surplus that’s going to add value to your living and lifestyle later on in life!

You can check out our Free Money Management System here.

Thanks for watching.

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