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Financial Rehab: A Money Management Metaphor For Entrepreneurs

Do you remember when they covered how to manage your money in school? Me neither. As a result, we're stuck doing financial rehabs on our lives.  Come learn about a money management system that you can build on.
Financial Rehab

Do you remember when they covered how to manage your money in school? Me neither. I was never a detailed person. If I had $12.65 in my savings account I’d easily spend $12. In fact, I often rounded the numbers of my account just to avoid an overdraft. There have been times in my life when I had no money and simply knew that I could make enough before the next bill came due. When I hit 18 I started getting involved with credit cards. Stop me if you heard this one before.

When I graduated (from Georgia Tech, go Jackets!) I stuck with what helped pay for college.  My entrepreneurial ways had me doing contract work, programming and web design.  I even launched an e-commerce business and got my real estate license. In business endeavors, my personal finance habits extended into bad entrepreneurial habits. That led to me overspending on marketing and not holding my expenses accountable. Basically, I went from spending it as soon as I got it to spending it before it came in. Ultimately this created debt.

Within a short period of time, I had run up a credit card bill of over $30,000.  Needless to say, we had a lot of losses to write off and thankfully this story has a happy ending.  However, it didn’t have to be that way.  If I had a way to manage money that made sense I might have avoided this.  I believe this is one of the greatest tragedies of education in this country, we don’t educate our kids on finance.  As a result, we’re stuck doing financial rehabs on our lives.   This series of blog posts is about that metaphor of tearing out old ideas (strongholds) and erecting God-given principles on money management.

The Meeting

In spite of my best efforts to drag us down, my wife’s income kept us afloat.  Then it happened. The day that I dreaded. The day that we had “the meeting” The meeting about what I have been doing with our money. From that moment forward I wanted to know more about money. Not how it was made, but rather how to save it, invest it and grow it. I saw the stress I had created and I never wanted to go there again.

I bought “Total Money Makeover” by Dave Ramsey and it filled in a lot of gaps. Through Dave’s “baby steps” I learned a series of steps to go from survival to success with money. I read finance websites and articles. Motley Fool became a regular stop for me.

Unfortunately, no matter how many authors and gurus repackaged the envelope system or explained compound interest I felt kind of lost with my income. I understood that if I put X amounts into envelopes each month that I would be able to control spending. However, after my wife and I had our “meeting” over-spending was not really the issue. Figuring out what a true budget was the issue, and it became a nightmare.

You see the problem wasn’t that I didn’t now have the education on managing money the problem was that there wasn’t a system for how I got paid. I didn’t get a paycheck per se. Some months I’d bring home more than some people make in a year while other months I’d little to no income. It’s hard to “spend” $1,000 out of the envelope system if you don’t have the $1,000 to put in there.  Likewise, it didn’t make sense to put $10,000 in an envelope either.

Financial Rehab

In between real estate and my study of finance I discovered this metaphor for finances called “Financial Rehab.”  If you’ve ever watched those HGTV shows where they find a run down home and fix it up then you know where I’m going.  They often have to tear down the walls to everything except the foundation.   Sometimes even the foundation needs to be set before they can build back up.  Structure by structure and room by room the building becomes a home.

Our finances are like that rehab.  We have to tear off what the world has taught us.  The ideas that tell us to do what we like and buy want we want.  If there was no credit cards would we be able to do that?   In the next series of posts, we’ll break down the foundation, the survey, and blueprint so that we can begin the demolition work.   For some readers, you’ll pick up small “hacks” that have helped our family and for others, you may need to build a brand new house.

When building a new home you have to survey the property and create “set-back” lines.  Typically this is to designate the building area.   Last week, I wrote about creating boundaries around your finances and this idea of the budget management principle of the circle ties into this metaphor neatly.    Next week, we’ll dive deep into the foundation needed for a great financial rehab.

After all of these years of helping homeowners with their finances, helping our family with ours and lately helping entrepreneurs I’ve found a system that simply works for us. It’s taken our family from survival to success to significance. Meaning we’re debt-free and now have giving in our budget.   We don’t make perfect choices but we have a very stable plan that offers security in a very unstable and insecure world.

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