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Managing your finances is not as complicated as many people believe it to be. You don’t need to be an “expert” to be successful with money.
Yes, you do need some basic technical knowledge to know what to do with your money. However, It’s not difficult to learn the fundamental principles of managing money like paying off debt and saving. Thousands of blogs give “how-to” technical knowledge on managing money away every day for free.
The truth is managing money is simple.
If managing money is simple, then why do so many people struggle with their finances?
Because another truth is that managing money is hard. Just because something is simple does not make it easy. Having technical knowledge is excellent, but it means nothing if you don’t know how to apply it within the context of your life.
If you’ve ever felt stressed out about money, and you’re not happy with where your finances are at right now, I want you to keep reading because you need to know and believe that you can absolutely become great at managing money.
Let’s review the three requirements to be a great money manager.
The three things you need to be successful with money
The right mindset.
Technical knowledge.
A system to turn knowledge into action.
The right mindset
You can know everything there is to know about paying off debt, saving and investing or anything to do with money, but it means nothing if you don’t have the right mindset.
When I say the right mindset, you simply need to believe that it is possible for you to be successful with money.
If you are struggling financially, it’s easy to fall into the trap of believing that today’s reality is how it will always be. This belief sets up a self-fulfilling prophecy. If you don’t have hope that things can get better, what is the point of applying any technical knowledge you might have?
Once you believe that financial success is possible for you, it’s critical to define what that success looks like. Everyone will say they want to be successful with money, but so few people can articulate what that means to them.
Start by merely finishing the following sentence; I will feel successful with money if…
The first thing you need to be successful with money is the right mindset.
Technical knowledge
Once you have the right mindset and you are excited to take action, the next thing you need is technical knowledge.
Again, you do not need to be an expert.
You only need to know some basic concepts about managing money.
Tracking your spending.
Creating a budget that locks in your goals.
How and why to build an emergency fund.
How to efficiently pay off debt.
How to increase your income while keeping your spending under control.
That’s all the technical knowledge you need to be successful with money.
A system to turn knowledge into action
Once you have the right mindset and all the technical knowledge required to manage your money, there is still one critical piece missing.
You need to be able to turn that motivation and knowledge into action.
Knowing the difference between the snowball method and the avalanche method to debt repayment is technical knowledge.
Figuring out which method works better for you and sticking with that method until you have paid all your debts is action.
Knowledge without action is useless. For every piece of technical knowledge listed above, you need a system to ensure you take the proper action.
You have to ask yourself three questions
1. How can you change your mindset?
2. Where can you learn technical knowledge?
3. How do you adopt a proven system to implement that technical knowledge?
If you can answer all three of these questions, you have everything you need to become successful with money.
I’ll make it easy for you and tell you that the answer to the above questions will lead you to the conclusion that you need to adopt one of three options to manage your money.
Three options to successfully manage your money
Keep doing what you’re doing.
Hire a financial advisor.
Learn and implement a simple system to manage money on your own.
Option one: Keep doing what you’re doing
This option is for people who;
Are Debt-free.
Have a fully-funded emergency fund.
Are saving enough for retirement.
Have a budget that locks in their financial goals
Are spending money the things they value most in life.
Aren’t stressed about money.
If this sounds like you, then keep doing what you’re doing because it’s working. If not, you’ll need to consider options two and three.
Option two: Hire a financial planner
A financial planner who earns their paycheck will tick all three boxes to help you successfully manage your money.
They will act as a coach and help you develop the right mindset.
A great financial planner will have all the technical money knowledge you will ever need.
They will help you implement a system to turn technical knowledge into action.
Hiring a great financial advisor is the best option for those who can afford it.
The only question is, can you afford it? An excellent fee-only financial planner will charge anywhere between $150-$300 per hour.
Option three: Learn a simple system to manage money on your own
If you’re not happy with the current state of your finances and you can’t afford $150-$300 per hour to fire a financial planner, then there is only one option that remains.
You need to learn how to manage money on your own. If that sounds incredibly intimidating, just remember you only need three things to be successful with money.
The right mindset.
Technical knowledge.
A system to turn knowledge into action.
Developing the right money mindset
I believe that the most important factor in developing the right money mindset is to have a powerful “why.”
The first thing you need to ask yourself is, why is it worth it for you to improve your finances?
If the only reason you care about money is to buy a big house, a fancy car, and nice clothes, you aren’t going to be successful.
For me, my “why” has always been my family.
This was true when I was deeply in debt and borrowing money to help my parents pay the rent.
It is still true today as I continue to create wealth to make life easier for my son.
Having a powerful why can help you develop the right money mindset.
Ask yourself, what’s your “why?”
Learning technical money-knowledge
This is the easiest part. For every question you have about the technical aspect of managing money, there are hundreds of “how-to” and “step by step guides” available for free from brilliant and thoughtful people.
If you want to take your technical knowledge a step further, you can always enroll in an online personal finance course.
The technical knowledge is out there. All you need to do is put in the time and do the research.
Developing a system to turn knowledge into action
This is the most challenging aspect of managing money on your own and where most people fail.
The challenge is taking that technical knowledge and applying it day in and day out until you achieve your desired outcome.
Let’s return to the example of paying off debt to illustrate what I mean by developing a system to turn technical knowledge into action.
You start with your mindset and ask yourself why it’s important for you to live debt-free?
Then you need to acquire the technical knowledge like learning about the snowball and avalanche methods to debt-repayment.
Now you need to apply that technical knowledge to your life and take action.
Start with a goal. When do you want to be debt-free? Let’s say you wanted to be debt-free in five years.
Next, apply the proper technical knowledge. In this case, choose either the snowball or avalanche method to debt repayment.
Let’s say you chose the snowball method. You would line up your debt from the smallest balance to the largest balance. This is the order in which you pay each loan.
Then you need to do some math. You’ll need to know how much you’ll need to pay on each loan each month to pay off all your debts in five years.
Once you’ve crunched the numbers, you need to automate the process. If you need to pay $75 on a credit card, $500 on a car loan, and $200 on a student loan to be debt-free in five years, then you need to call your bank and set an automatic payment for the proper amount to each loan.
Finally, you need to monitor your progress and make adjustments as needed. Once you have the credit card paid off, that frees up an extra $75 per month to pay towards the car loan. So, you need to call your bank and increase the automatic payment to your car loan by $75. You then repeat the same process for the student loan when the car payment is paid off.
That is how you develop a system to turn knowledge into action. Whatever money management problem you are facing, start with a goal, apply your knowledge to develop a strategy, crunch the numbers, automate the process, and monitor and make adjustments as needed.
You can be successful with money
I don’t care how screwed up your finances are right now, I need you to know that you can absolutely be successful with money.
You only need three things.
1. The right mindset.
2. Technical knowledge.
3. A system to turn knowledge into action.
This leads you to the conclusion that you have three options to manage money successfully.
Keep doing what you’re doing if you’re currently getting great results.
Hire a financial planner if you can afford it.
Learn and implement a simple system to manage money on your own.
That is everything you need to be successful with money, and I know you can do it.
If you're ready to master your money, don't forget to enroll in my video-based personal finance course, "Millionaire In The Making: The 30-Day blueprint" Click here to enroll.
This article is for informational purposes only, and it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.