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  • Writer's pictureGreg Cadogan

Money Mastery: The Art of Allocating every Dollar

As we continue with our Money Mastery Series, it is time we look at a topic that I know many people dislike. Yes, let’s talk about budgeting.


Recently, my talks with clients have been about building a Spending Plan. So going forward, let’s call it that. It is observed that the word budgeting makes persons feel that it is all about restriction hence they dislike everything about the process.


Your Spending Plan allows you to take control of your money instead of the other way around. I want you to picture your money as your employees. You are the CEO; your job is to manage your employees in a way that will make the business (YOUR LIFE) successful.


Your employees will have different responsibilities, just like a business. Some will have jobs that will benefit the business right now in various ways, others will have jobs where the business will not see the benefits until sometime in the future. However, let us ensure that every employee has a job and what’s the best way to ensure this?


Having a budg……I mean having a Spending Plan. Hope I didn’t trigger anybody. lol

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Your Spending Plan

 

There are five (5) basic aspects to your Spending Plan that you should know and be able to track.


Income


When you receive money, whether from salary, family, business, or investments, that is your employees coming into your business ready to be told what to do. What will you tell them?


Needs


Let’s start with the jobs that will benefit you right now and without your employees doing these jobs, the business will crash. These jobs are your bills, grocery, transportation, and debts. Note, I didn’t say monthly because not all bills are due monthly. Don’t worry, we will break down how to manage these irregular expenses in the future. They should be about 50-60% of your employees.


Savings


This department can be broken down into two functions. There are the jobs that will protect your business from unforeseen circumstances (Your Emergency Fund). Then, there are the jobs that will be used in the future for your goals (house, vacation, birthdays etc.). This can be about 10% of your employees.


Investments


The go-getters, their function is to recruit new employees to operate in all the other departments. Without them, there is very little hope for the business to thrive. Eventually, you want these go-getters to be the only source of income. This is the definition of true financial independence. This can account for another 10%.


The Wants


My favourite, the fun employees. We don’t talk often enough about these employees, but they are very important to the business. They don’t contribute to the survival, or the protection of the business and they don’t even recruit new employees. One would consider these employees as a waste of resources and best to allocate them elsewhere. However, these guys are the morale boosters for the business. They add much needed colour for the CEO so that he/she can remain focused on making the business grow. Also, if the CEO doesn’t consciously assign employees to this department, then eventually other departments will get neglected and risk there being too many morale boosters in the company.

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The numbers that you see, are not exact science. The key is not to neglect any of the departments, they may have different functions, but they all work together for a common purpose, to make you become the best CEO for your business. In other words, to make you live your best life. 

See you soon.

 

 

 

 

 

 

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