Money is a charged topic for most.
But your ability to create a sustainable and lasting career or business hinges on your financial smarts. So, it needs to be addressed, regardless of how uncomfortable or emotional it makes us feel to talk about it.
Managing your money well could mean the difference between releasing a new album every single year and not, as my friend and singer-songwriter Chris Gheran would testify. And, if you’re not a musician, just substitute the term “album” for book, painting, play, or whatever applies.
Here are some tips on how to manage your money.
Forget What You Think You Know About Money
If you’re happy with your financial life, then disregard this section and move on. But if things aren’t going well for you, keep reading.
First, I want you to forget everything you know about money. And, if you’re honest with yourself, you’ll recognize that this pool of knowledge is very small anyway.
You may know a thing or two about mortgages, mutual funds, TFSAs (Canada) or Roth IRAs (U.S.). But the banks don’t have your best interests at heart, and that’s likely where your financial “smarts” come from.
Banks never taught me anything about managing my money. They only tried to push more products on me.
“You don’t have a mortgage? Oh my god!” The would say. “You should get one. You could totally buy a house.”
I once had a mortgage. I’m not a big believer in them anymore. I also had mutual funds and TFSAs. Granted, I think a TFSA is perhaps the most benevolent product available, and beneficial if used correctly.
Regardless, if you went to “bank university” like most people did, and you’re confused about your money, you’re probably like most others out there. You can’t learn how to master your money from an entity that’s there to sell you financial services, even though some are worthwhile.
Pay Yourself First
If we want to succeed in our financial lives, first we must trade in what we think we know for time-tested and proven strategies.
Here’s one strategy worth implementing immediately – pay yourself first.
This is where a lot of people get it wrong because they assume someone else will take care of them later in life, whether it’s the government, the company they work for, their family or their friends.
The problem with this is that government is actively reducing and eliminating pension programs, and I can almost guarantee that the company you work for is not interested in keeping you on payroll longer than they must.
Your family and friends are either going through or will be going through the same financial troubles you did and won’t have any more money to deal with the inevitable than you do.
Utility companies aren’t going to come to your rescue either. They will happily stick your other family members with pending bills when you pass away.
And, last but certainly not least, credit card companies could care less what financial state you’re in. They will keep stacking on the fees to get as much money as they possibly can out of you over the long haul.
So, the only person that cares about your financial future is you. When money comes in, you should pay at least 10% of that money into savings right away. It doesn’t matter if you can’t pay your utility bills in full. It doesn’t matter if you’re going to be late on that credit card payment. Pay yourself first.
I’m not telling you to go and ruin your credit. All I’m saying is that after you’ve paid yourself, you can problem-solve the rest later. You’re a creative entrepreneur. You’re resourceful. There’s always a way.
I would sooner bet on my own future than willingly hand over all my money to some faceless corporation that could care less about my financial wellbeing.
Create 3 Categories of Savings
This is something I picked up from Tony Robbins and it has worked well for me. It’s not a flawless system by any means, but it’s a good way to think about savings.
Many people only have one savings account into which they pay into. And, you’re a step ahead of most if that happens automatically or on a planned schedule.
I’ve found it helpful to create three categories of savings. They are:
- Emergency fund. You should save six to nine months’ worth of expenses into this account. That way, if anything come up (and it always does), you’ll have money to cover it.
- Dream fund. Everyone has trips they want to take, things they want to buy, occasions they want to celebrate. Don’t put this off indefinitely. Begin putting money into your dream fund right away so you can go and experience life.
- Aggressive growth fund. Once your emergency and dream funds have been furnished, you’re ready to build your aggressive growth fund, which will be used to invest. This is money you wouldn’t mind losing. When investing, it’s always better to be playing with money you could live without. In an ideal world, you wouldn’t lose it, but that possibility always exists in investing.
As for what to invest in, I believe lifecycle funds are the best bet for most people. If you want to be more hands on, then index funds might be more to your liking.
Reinvest in Yourself & Your Future
Money is a tool.
As creative entrepreneurs, it is imperative that we learn how to use this tool to further our art, careers, and businesses.As creative entrepreneurs, it is imperative that we learn how to use money to further our art, careers, and businesses. Click To Tweet
What do most people do after they’ve just earned, won, or been given a lot of money? Waste it!
As a business owner, you should understand the value of reinvesting in yourself. If you have extra money, put it back into your business.
The reason you made all that money probably had something to do with your creativity and art to begin with. So, if you prioritize reinvesting in yourself and your future, you can keep growing your business, thus setting yourself up to earn more down the line.
Your business needs to be fed and nurtured. So, keep feeding it and keep nurturing it as you’re able.
Be Proactive About Your Money
Many of us tend to believe that if we just had more money, all our problems would go away.
What we don’t realize is that if we just became better managers of the money we have, we’d be able to solve many of these problems without additional resources.
This isn’t to suggest that it won’t be hard work. But instead of counting on a windfall, learn to count your pennies and understand where they’re being spent. Learn to allocate your funds to things and people you care about. If you keep at this, you will make headway in your financial life.