No doubt about it, if you want to live life on your own terms you are going to need to take control of your money—or better still become the master of your money. You do not need to be rich, nor earn six figures or more, but you do need to follow some basic mechanics, have a long term plan and the proper mindset. The goal here is financial independence.
There are several levels of financial independence to be had and at each level you will accrue a better and better measure of freedom and self-determination. Besides the actual dollar benefits, however, perhaps the best reason for following this course of financial planning is for the intrinsic benefits. Being a wage slave to no man, no employer and no bank is a solid foundation for living as a man should.
Let’s start simply and consider having a cool $5000 cash in the bank as a reasonable first step. Even at this level you will walk a little taller. If not in terms of your employment situation, at least in terms of those demoralizing unplanned expenses or repairs that tend to pop up. Most any home or automobile repair can be easily paid for with $5000. And most would still leave a decent sum ready to be applied to the next mishap or breakdown; making it a shorter run to get back up to five grand than it was starting from scratch. You’ve done it before and you can do it again.
There is just something intrinsically satisfying about paying cash for something that needs to be replaced or repaired. It’s certainly a better course of action than adding insult to injury by having to take on debt to do so. As simple as it sounds this is an important first step because even here in the United States a majority of adults cannot write a check for $500. This is a feeble existence, not worthy of a man.
Beyond $5000 of emergency repair money, the next major goal is 1 year of expenses as cash in the bank. And from there it’s a race to true financial independence—enough funds available so that you can essentially draw from your investments in perpetuity. I will discuss this figure later, but take particular note that if you are gainfully employed this is a goal that is achievable by any man.
Getting that to that initial 5K is key. It is the foundation for your lifelong plan because if you can save five grand, you can certainly save for a full year of living expenses. And if you can save for a full year of expenses, you can certainly make it to true financial independence. It’s just a matter of continuing to cash flow each month and letting the magic of time and compounding do its thing.
The real beauty of all of this effort and discipline, as with many things in life, is that you get to enjoy the journey as well as the ultimate goal of being financially independent. All along the way you will know you’re a man who is being smart and crafting his life to his own liking. And as each month passes and the years go by, even if you’re not all the way there you will begin to get a taste of true freedom. The days will be brighter, problems will be handled with ease and you will experience a tranquility and peace of mind that even the very rich cannot entertain. For you will be a man of prudence and reserve, instead of a man recklessly churning away on the Hedonic Treadmill.
So let’s discuss both the mechanical aspects and the mindset necessary to live life on a higher plane by leveraging each day of work to great benefit. You’re going to have to work to survive anyway, so you might as well work to prosper.
Create a Pro Forma Budget
More specifically, the plan is to create an electronic pro forma budget in the form of a spreadsheet. Get started very simply by listing your expected or current line items for monthly net income and expenses using a either a computer application (e.g. MS Excel) or cloud based source (e.g. Google Sheets). From top to bottom list your income figure(s) and then expenses. And then of course, at the bottom should be a total for remaining income or loss.
Create a computer based model so that over time as you develop your pro forma in terms of sophistication, you will be able to manipulate the entries at will and then evaluate the results. Being able to adjust line items based on anticipated income or expenses is a powerful position to be in. I bet, not five in a hundred households in the West have such a birds eye view of their financials. Invest an hour of your time to get started and then benefit from a lifetime of control and prosperity.
Make it real and list everything. Of particular interest, of course, are the categories for expenses. Create a line item for every expense. The best way to do this is to go through six months of your bank statements line by line until you can’t find one item that has not already been listed as an expense category. For those items that do not occur every month, simply apportion monthly as appropriate.
Taking a step back for a moment, the idea behind creating your own electronic model from scratch is that you will necessarily understand it and own it at a fundamental level. By working through your income and expense line items one at a time you and then developing it over the years you will understand your finances like the back of your hand.
Ultimately the goal at every stage of your life is to see, in theory, where your bottom line monthly cash flow will stand as your income and expenses change. This monthly cash flow figure is the key to your long term financial independence. If you are able to empirically plan for cash flow and then achieve it as expected there is nothing that can stop you in the long run. This is the measure of control that you want as a man who is pursuing life on his own terms; as a man pursuing financial independence.
Distinguish yourself and create your own financial pro forma as the foundation for your financial life.
Reconcile and Pay Bills Weekly
Set aside 1 hour a week to reconcile your transactions and pay your bills. This is a purely mechanical endeavor but one that I personally find very satisfying to accomplish. Run your personal finances as you would a business. Maintain precision and control by making it a habit on the same day each week to reconcile your financial activity and pay your bills. Take pride in the fact you are distinguishing yourself in another one of many areas as you pursue your very best each day.
Invest 1 hour of your time each week in a fashion that most other men will not, by applying this simple habit. You will acquire a tremendous understanding of your financials and over time separate yourself from the ordinary man. And make sure it is you that is doing this most important work and not your woman. If it is your woman who pays the bills in your household, put a stop to it immediately. Use this new weekly routine as an excuse to make the change. Just let her know it’s something you want to do from now on.
Professional advice aside, take full responsibility for maintaining your books, budgeting, bill paying and investing. Invite and consider your woman’s advice, but take control of this area of your life. For many reasons, you will want to lead your woman and this is certainly one of those areas where you both will benefit from having primary control. After all, if financial difficulties should arise it will be you that she turns to for a solution; as well she should. So be proactive here and make it your responsibility to manage your household finances. As a man deliberately crafting his life you will need to have 100% control over your personal financial affairs.
Reconciling your expenses simply means to categorize them. Get yourself some personal financial software such as Quicken, YNAB (youneedabudget.com) or a cloud based application such as mint.com. Each of these software programs will allow you to download all of your transactions and essentially categorize them automatically. This is how you will measure your actual expenses against your ProForma Budget. YNAB, in particular, will allow you to keep track of your monthly budgetary progress in real time.
Another simple mechanical action is to pay your bills two weeks out on the same day of every week. In other words, the cutoff date for bills to be paid is two weeks from the day you pay your bills. That way, if you pay through the mail by check, your bills will always be paid on time. As your mail comes in, separate the bills and stack them in chronological order placing the earliest due at the top of the pile. Then each week, pull the bills that are due through 14 days out. After the first time which will include two weeks’ worth of bills, you will be paying one week’s worth of bills at least one week in advance of their due date.
Pay your bills as agreed and pay them on time. There is no excuse for late or missed payments. This is a feeble and irresponsible mindset. Be responsible and establish a stronger credit record, but more importantly, button down this area of your life. Control what you can and make your life easier.
Plan for Cash Flow
Now that you have your ProForma Budget as a model and have established the bookkeeping habits necessary to track your actual expenses, it is time to bear down and lay the foundation for your financial independence. It’s time to plan for cash flow. To put it simply, you need to spend less than you earn each month. It sounds simple, but the fact of the matter is that most people in the free world live hand to mouth; they spend all their money as it comes in, without much consideration at all. You on the other hand will make it a priority to structure your finances so that at the end of each month there is cash left over to put in savings or pay down debt.
It is never too late to take action here. Even if you are deeply in debt it is worthwhile to adjust your standard of living to pay down that sum until it is all gone. No matter how long it takes it will be worth it. Bare minimum, once all is paid, your monthly break even point will be much lower. This will make it much easier to survive financially and relieve you of the stress and related health effects that accompany financial encumbrance over the long term.
If you are saddled with debt from a mortgage, credit cards and car payments it’s time to consider getting off of the Hedonic Treadmill. This is a mindset change that will be necessary if you wish to regain financial control over your life. Is it really worth all that material accumulation to bear the burden of all that debt? Or would you rather live more humbly for a time for a chance at financial independence? The key to breaking away from a materialistic lifestyle that is enslaving you to debt and your employer is to embrace intrinsic values over extrinsic ones.
Once again, you will need to have what could be a difficult discussion with your woman regarding these matters. Here in the West, women are responsible for up to 80% of all household spending. And, of course, on a sociological level appearances are very important to western women. A step down a rung or two in material standard of living will be difficult for her to accept. At some point though, you’re going to have to ask yourself if it is worth dying for to keep your woman (and children) at a level of material comfort beyond that which you can afford. Or, even more simply, is it worth all the never ending stress to look the part she wants to look?
Don’t kid yourself here. If you are way over your head in debt without making any progress, there will be a price to pay. It will eventually cost you in terms of your health, both physically and psychologically. At minimum it will shorten your life and at worst the manifest health effects could eventually kill you. And you know what? If things do fall apart for you, she might just dump you and move on regardless. After all, you couldn’t manage to stay afloat and perhaps there is a better provider out there who can.
Your personal sacrifice, blood sweat and tears won’t matter at all. In the end all that matters is results. Women are programmed to survive and ensure the survival of their children. Your good intentions and years of sacrifice won’t matter at all. Your children will eventually grow up and leave you and so might your woman. So do yourself a favor and take care of yourself while you take care of your family, live below your means and cash flow every month.
This is Your Foundation
As a man pursuing his best you are now aware of the necessity to take control of your money. Doing so is a necessary function that needs to be mastered. You do not need to become rich or earn a large salary, but you do need to work for a living and make the most of your take home pay.
To do so, you will create a Pro Forma Budget in the form of an electronic spreadsheet. This will be the model from which you will plan for financial independence. Basically you will be using elementary school arithmetic to eventually become a free man; free from debt, free from financial worry and some day freedom from the need to work for pay.
You will then apply the nuts and bolts of weekly bookkeeping to stay on top of your personal finances and track your progress. This will be one of the simple habits that will eventually lead to you becoming a superior man. Little by little you will separate yourself from the norm.
With the mechanics under your belt, you will then plan to cash flow every month. This is the key to your financial future—it will solve all your financial problems and eventually lead to your financial independence.
The difficult part to getting to a solid monthly cash flow is adjusting your material standard of living as necessary. If both you and your woman are currently on the Hedonic Treadmill, you will need to make some concrete adjustments. And by definition, if you are not cash flowing each month you are indeed running your life on said Treadmill.
For your sake and the sake of your loved ones, have the difficult conversation with your woman and take control. Remember, better to fight through the resistance now than suffer the devastating consequences later. You will put your Mission first, become the very best you can be and begin the march toward financial freedom.
All the best,