Ten Financial Steps to Live By

Written By The Thrillionaires Published April 12th, 2010

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By Dr. Dallas Humble

Have you ever stopped to examine where your financial life is heading? Many of us have no idea where we are financially. Most of us know, I am convinced, that although we are all human and will make mistakes, experience is a nasty teacher. We know that we are in debt, have bills to pay, and many times don’t have money left over at the end of the month. But when asked what is their net worth, many honestly couldn’t answer because we would rather avoid thinking about something that has gone out of control.

Every day we all learn what works and what doesn’t work in the financial world through trial and error. Wouldn’t it be better if we were taught sound financial principles or steps from childhood that if followed would assist in avoiding many costly mistakes. The steps I have laid out for you in this chapter are aimed at doing just that. Without these financial principles and a financial plan, we can become extremely frustrated with life.

For years concentrating on ways to expand my business and better my financial life, I faced many questions. How can I reach more people? Should I add more employees? Should I do more advertising? Should I sign that note? How much should I give and save? The list goes on and on.

All of these things are important. However after many years of business and expansion, I am convinced that without a financial plan, you are lost. There is nothing more devastating to one’s life than financial strain. It permeates all other aspects of your business, personal and even spiritual life. Your ability to concentrate on anything else greatly diminishes.

What I am going to reveal to you is not a revelation or anything you possibly haven’t heard before. We are going to review several ancient financial principles that, proven over time, can prevent from making many financial mistakes. Hopefully we will discuss them in a way you can understand and use in your life.

Regardless of whether you are in business for yourself, working for someone, a doctor, lawyer, CPA, or otherwise, you will find these principles are basic and simplistic in nature.

Although success is much more than wealth, the financial building block of your life needs to be in harmony for you to function productively. That is not to say you have to have a lot of money to be successful. But if you violate certain financial principles, the rest of your life may suffer as well.

There are literally thousands of financial planners who would love to assist you along the way, but many of them can’t handle their own finances. This brings us to the first of ten steps we will discuss:

Step 1. Do not trust your finances to someone who cannot control their own.

This includes financial planners, certified public accountants, bookkeepers, insurance clerks, and so on. I personally have succeeded exceptionally in this area, which gives me the right to claim it as one of the financial steps to live by.

I had a “financial adviser” who was very intelligent and could literally charm the money right from your bank account. To top it off, he had more than 20 close acquaintances and friends that were clients of his. I used this guy for everything. He invested my money, negotiated any purchases I made, corresponded with my CPA and handled our company retirement plan. My early practice was richly blessed, and in turn so was my financial adviser.

After spending many thousands of dollars and enduring years of frustration over not having any money (liquid money, that is), I began to question this adviser about where I was headed. He replied with the same old song and dance about how it takes time to accumulate wealth. He explained that he had no control over what congress did or the new tax laws. All the programs we were in were very solid, he said.
To make a long story short, I lost practically everything. My retirement plan was gone. I watched several close friends and colleagues file Chapter 7 bankruptcy over the years. I barely circumvented that myself.
My CPA was honest and extremely intelligent, but he couldn’t handle his own finances. He was always needing money, always behind and always owing taxes! This was not a comforting feeling to have about a CPA.

My bookkeeper didn’t pay our bills on time because she didn’t pay her own bills. How can you expect someone to handle your finances that can’t handle their own?

None of these people are with me now, but I had to learn this the hard way. Take my advice: Only deal financially with those individuals who have their own financial house in order. How do you find this out? Ask around, do research and do whatever you have to do, but find out.

I’ll give you one for instance that should have caught my attention years ago concerning the previously mentioned financial adviser. I can never recall having any liquid cash saved in any of my accounts. When I asked him the question, “You must have cash saved; why shouldn’t I do the same?” he answered, “I have very little cash. I have all my money ‘working’ for me, not just sitting around ‘stagnating.’” Get the picture?

This brings us to my second principle.

Step 2. Never invest in something you do not understand yourself.

This is something that came somewhat easily for me, although late. After all I had been through, I joined several financial organizations, attended seminars, read books, listened to tapes, watched videos and read every article I could get my hands on that dealt with finances. I wanted to know it all: bonds, stocks, mutual funds, annuities, life insurance, retirement plans. I was like a sponge. I felt like I had betrayed everyone including God Himself by not handling what I had blessed me with properly.

After learning, I began to make intelligent decisions on my own, or with the help of someone who thought the way I did. I was amazed at what I learned, and at what I had invested in prior to that time.

Did you know that, with a little time, you could become as knowledgeable about most basic money matters as the majority of those who hold themselves out to be financial planners? Many people are skeptical of this and will pay exorbitant fees for investments they could have chosen for themselves.

You can read about research that has been done in this area in most financial publications. Please don’t misunderstand me. There are good financial planners who can help you greatly. Many well-known individuals like Mr. Dave Ramsey (www.daveramsey.com) and others have good sound financial advice but you have to seek it out and be willing to learn and practice the principles. It’s similar to any business; however, there are many bad ones as well. If you have people handling your finances, be sure you understand principle number one. Go one step further and educate yourself in your own financial matters. Remember, it’s up to you to make the ultimate decision. It’s your money, and no one is going to have the same concern about it that you will. By educating yourself, you, too, may be amazed at what you can do.

Step 3. Before you can accumulate real wealth, first get your tax life under control.

Too often people, myself included, think they are getting ahead and then get slammed between the eyes with an unexpected tax bill. With inevitable tax rate increases, it is even more important that you understand taxes and tax laws. Don’t just rely on your tax advisor who is there to file your taxes. Granted, some CPAs may assist in planning, but it is up to you to put aside the money for taxes due and provide the necessary information and documentation regarding your tax status. It is important that you monitor your financial statements and status throughout the year. Why? Because you can’t know where you are headed if you don’t know where you are.

Remember that the profit figure is what you pay taxes on. It has nothing to do with how much money you have in the bank. I know this sounds simple, but I wish I had a dollar for each time someone said, “How can I owe that much when I don’t have any money in the bank?”

Sit down on a regular basis (at least quarterly) with your tax advisor and discuss where you are tax-wise. Learn to read your statements and calculate your approximate taxes due. Open an income tax account and place that amount in daily.

In the past I found it difficult to pay both income and payroll taxes because of a lack of funds. While a business is in an expansion stage, cash is a rare yet welcome asset. I had to find a way to save for taxes and thereby have the money available when necessary. In order to do this, I opened an income and payroll tax account. We placed a dollar amount in the income tax account daily, based on our taxable income as well as a calculated amount for payroll taxes. If you are not self-employed, this is obviously not necessary. But you still need to stay up to date on your tax deductions and tax rate to be sure the correct amount is being deducted from your check.

Always reevaluate this regularly to be sure you are not behind or too far ahead. If you are self-employed and you have specific accounts designated for taxes (i.e. income, payroll, etc.) be disciplined and understand that the money is no longer yours to spend. The advantage of doing this is that you have designated, or earmarked, this money, and it will not be spent for anything else, no matter what.

These are things you will have to adapt to your individual circumstances. They do work and may save you an enormous amount of grief in the long run. Whether you use these specific items to assist in handling your taxes is not the issue. The issue is that you need to face up to the fact that taxes are a part of life and make this consideration an integral part of your financial plan. Without doing so, you may find yourself pursuing a goal that you will never reach.

Step 4. Never invest your money in something you don’t know how to get out of if the cash is needed.

In other words, steer clear of non-liquid investments as much as possible. I can’t tell you how miserable my life was because I violated this principle. If I ever needed money I was told I couldn’t get it because it was fully invested. We would have to find someone to buy my investment (i.e. limited partnership, etc.).

There are certain liquid investments that may decrease in value if sold prior to maturity, and there are also certain non-liquid investments, such as real estate, that although are illiquid in nature, have made many investors wealthy over time. That’s well and fine. Keep in mind though; there are many more that have made investors poor. I happen to like real estate as an investment as long as I am confident of the area and potential for income or a quick sale. Just be sure that regardless of what you invest in, you know where the back door is, how to get to it and what it entails. Circumvent as many surprises as you can.

There is nothing more devastating than to find out that your hard-earned money is in a “non-liquid investment” that you either can’t get to, or lose a significant amount in principal to get bought out. By educating yourself and becoming involved, you may continue to make mistakes and perhaps even lose money from time to time. But the advantage is that you will generally know what you are investing and help you weigh the associated risk. That in turn can save you from making a financially devastating mistake.

Step 5. Give a percentage of your money regularly from your heart.

The fifth step encompasses all you are made up of on the inside. It really outlines your true purpose for accumulating wealth. Without it, money leads to greed, and greed leads to self-destruction. The Bible tells us “the love of money is the root of all evil.” It doesn’t specify money itself, but rather, the love of it. Think of what that says. Practically all corruption in this world revolves around money and the power it brings to those who have it. Don’t fall prey to it.

Learn and live by this principle. What I find most interesting are the books published by authors discussing this principle as if it were something new. They explain it and relate it to planting the seed in fertile ground and watching it grow otherwise known as seed corn. The Richest Man in Babylon by George S. Clason discusses this principle. Many other famous authors discuss it but the point is that it’s a principle that anyone who understands the principle of tithing can relate to.

Many authors discuss this principle as a way to feel better about yourself. One author discusses this principle as a way to receive one-hundred fold return on your giving. Both, in my opinion, are wrong. Giving should be from the heart with no expectations in return. Will you be blessed for it? When you give from your heart for the right reason, yes, but perhaps in different ways.

Many people have become turned off to tithing and giving regularly with their money because they don’t trust churches, preachers, charitable organizations and the like. Yes, it’s important to give to a source that you believe is making every dollar count, but, believe it or not, it is not the most important thing. The most important thing is giving. This principle works, and it works every time.

For example, how can you develop greed in your heart if you give 10 percent or more of your income on a regular basis? The answer? It’s difficult, if not impossible. I have seen greed destroy people who had the potential to do well with their lives. Families have been lost, relationships destroyed, jobs lost, and financial bankruptcy filed in almost every case. All because of greed.

There is nothing wrong with doing well for yourself. It has been said that money doesn’t buy happiness. I agree with that wholeheartedly. Happiness needs to come from the heart. I also believe, however, that the lack of money doesn’t buy happiness either. Maintain a proper balance in your life. Read regularly for your mind. Exercise regularly for your body. Spend time with your family. Worship regularly for your spirit. And last, but not least, make financial matters a part of your mental education.

Someone once told me that investing properly is not important. It is not if: (1) giving isn’t important to you; (2) spending more time with your family isn’t important, and (3) being able to say one day that you are working because you want to, not because you have to, isn’t important. It’s only important if you want those things. Do you? You are the only one who can answer that question. I thoroughly believe you have control over your own destiny. Make the decision to take control.

Here is some food for thought that was told to me some time ago: Life isn’t easy. As a matter of fact, it is downright difficult. But, if you are tough on yourself, life is going to be a lot easier on you.

Step 6. Save 10% of your income, regardless of your age.

You want to retire one day or at least be able to? Unfortunately, just working hard is not the answer. As important as it is, you have to save money in order to have it. It’s a funny thing; I’ve seen people who earn low- to mid-six-figure incomes annually that have less money saved than people who earn less than $50,000. Why is this? The answer is simple. The individual earning the larger income is not frugal with his or her money. There’s always tomorrow, therefore, saving today is not necessary. The individual making a lesser income in this case scenario is concerned about saving for tomorrow, not spending for today. Saving money may seem difficult now. If you can’t save 10%, begin with 5% or whatever you can. Take it off of the top before you pay anything else. There are many savings institutions, mutual fund companies, etc., that have low minimal initial investments and will automatically draft your account on a monthly basis. Take advantage of tax-qualified savings plans such as IRS’s, 401K’s, etc. Remember, it’s not what you make, but rather what you do with what you make that counts. Begin making your hard earned money count today. Start saving and watch your financial future grow.

Step 7. Live by a budget regardless of your income.

Have you ever wondered how people who make exorbitant incomes go bankrupt? It happens everyday. You see individuals on television, celebrities, etc. filing Chapter 7 and companies filing Chapter 11 that are all making large amounts of money. Why is that? There are a variety of reasons and although some are legitimate, many are excuses for not taking the responsibility to have a budget and adhere to it. From something as large as our federal government to something as small as a single individual, without a budget, financial chaos is the ultimate destiny. It’s really not as complicated as it may seem.

To establish a budget, first look at what it takes you to live and operate per month. On a personal basis you can categorize each area with the maximum amount you wish to spend per month. Each time you make expenditures toward these items (i.e. groceries, etc.) you can indicate the amount on the budget sheet. At the end of the month you can easily see where your money has gone and what areas, if any, you need to cut down in. Don’t forget to include principles numbers 5 and 6 to your budget. There are several good software programs on the market that will assist you in doing this. For those of you who wish to do it manually, that’s fine. Whatever method you chose, be disciplined with it.

As for a business, your monthly Profit and Loss sheets are your Bible of operations. Not a month should go by that they are not reviewed, implementing changes where and when necessary. You can even go one step further as I have in my business by taking your last 12 months average from each category and placing someone responsible for each of them. Purchase orders should be signed before ordering items, materials, etc., by the department head. That individual in turn is responsible for his or her department.

If you are a small business the department head may be you. Regardless, of whether it’s home or business, someone is required to be responsible for expenditures. Last, but not least, you absolutely, positively, need to get your tax life under control. This was covered in the third financial principle and cannot under any circumstances be overlooked. Summarized, don’t spend more than you make and separate tax money from your money. Understanding and living by these two simple yet life-changing statements can make the difference in your financial statement and ultimately, your life.

Step 8. Don’t co-sign or guarantee a loan unless you are willing to pay for it yourself.

I can’t tell you how many times I violated this step. With one exception, I paid for it every time. This single principle can bankrupt you if violated regardless of how well you adhere to the other nine. The Bible itself is explicit about the guarantee of another’s debts (Proverbs 22:7).

I understand there are times when a moral obligation seems to overwhelm you and take precedence. Look at it this way. Most of us could not have received credit on our own without the assistance of someone else, someone who believes in you. However, should you be asked to help with a certain debt, face the fact that you are responsible and you have no rights to ownership in most cases. In other words, if you co-sign for an automobile and the loan is defaulted on, you pay and you don’t own the car.

The same is true for most guaranteed loans. I’ll tell it to you the way I was told when I first asked for assistance. “Start out slow. If I help you this time I expect you to live up to your obligations. If you do not, you will not get another chance. This is your chance to prove yourself. Do not mess it up.”

Obviously I am not suggesting you should co-sign for anyone. I am, however telling you that I know most of you will, whether it is for a son or a daughter in need or someone close to you. Inevitably, you will be asked. Weigh the odds. Look closely at the person. Do not hang yourself out or jeopardize your financial status and if at all possible try not to do it at all.

Step 9. Never make business decisions under pressure.

“This is the last one at this price.” “If you buy it today, I’ll knock off this amount.” “You must make a decision now.” “I’m glad you came in today. This is the last one of its kind.”

These are but a few of the statements made that place a person in a situation of an immediate decision. With the exception of a few cases, I have yet to see a correct decision made when under pressure. Anything worth buying, investing in or contracting with is worth waiting for. Good business decisions require knowledge about the subject that, in turn, requires time. Remember, there is always tomorrow, always another car, another deal, another house, another whatever.

I have taught my children a simple yet meaningful prayer that we made part of our daily prayer together for years. “Lord, help me to make the right decisions when faced with choices.” At 4 years old, it may not have a lot of meaning, but it will. Perhaps we all could use a little help with our decisions. I know I do. Make patience and prayer an integral part of your decision making process. When pressured with no way to turn, walk away. It may be the best decision you’ll ever make.

Step 10. Prioritize extra cash: give some, invest some, and pay extra on debts.

Sound simple? It is, but it requires discipline. Don’t just say you will do it. Make it a law. It’s just too easy to receive an extra $100, $1,000 or more and think about the things you would like to buy first. If you have money left over after dividing it, then by all means buy something. Treat yourself or save it for later.

Regardless, if you follow this simple rule, you too will see your net assets grow. You’ll feel good about yourself and the decisions you make as well.

ABOUT THE AUTHOR: Dr. Dallas Humble is an author, speaker and business coach. He has written numerous articles published in professional journals worldwide as well as authored numerous books on business management and success principles. Dr. Humble has spoken to and consulted with thousands of his colleagues and individuals and on inspiration, personal development, motivation, leadership and business management. He is also featured in the movie, The Journey, an inspirational film about life and the pursuit of success with Brian Tracy and Bob Procter. Often known for his Make It Happen Strategies, his positive messages have created hope, belief and a winning attitude in people from around the globe and have placed him among the top speakers in America today. For more information on his services, products, events or speaking engagements visit his web site at www.makeithappennetwork.com or email him at support@makeithappennetwork.com

Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

My name is Roger Due and I am from Albuquerque, New Mexico and I am the owner of the Monsano software company. This has been an absolutely fantastic conference. This is the best I have ever been to.