How Are Your Personal Finances?

I've been fortunate enough to have had a great mindset about money from a young age. I wasn't aware of what an important trait this would turn out to be - I just naturally did it.

I didn't grow up in a rich household by any means, but I did grow up with positive examples of living within one's means.

This is the only thing I can think of that may have influenced how I viewed money, especially when unaware that the rest of the world didn't always do the same.

I was in my 20s when I got my first full time job at an American corporation (Yes, only people who are not originally from the US talk like this). I remember vividly taking the following steps:

• I contributed to my 401k at my job - they matched up to a certain % (free money!)

• I never had more than 1 credit card open at once - I used it for most transactions

• I paid my credit card bill in full monthly

• I had an annual goal to save at least $10,000

• I maxed out my Roth every year ($5k was the max)

I'm honestly not sure why I was so diligent at these things in my 20s. On one hand, I absolutely did not like owing people money - I still don't. There's just an uneasy feeling that I get. On the other hand, I was fascinated with the idea of watching money grow in my bank account, and still am to this day of course, but unfortunately with not nearly as much diligence as I had back then, welp....more on that later.

I never quite got into the designer clothing or accessory fad and back then, I had no real clothing store addictions - my biggest kryptonite was food (eating out).

Fast forward a couple years, okay maybe more than a decade - I still feel the same way about money and saving as I did back then. My mindset is similar, but I now spend more than I did back then. My money now goes to travel, more upscale food experiences, clothing and the occassional grooming experience - hair, nails etc. On the not so fun side, I now put money into personal and business investments, long term insurance products and bigger bills. Oh yeah, and those annual savings goals? I'm no longer as diligent as I used to be.

Despite all of these changes, I can say that my mindset will naturally trigger me to slow down, take a step back and build up again, if I believe I'm spending too much, or if my cash flow is low for some reason. I also realize that “low” cash flow to me, means something very different from others. Through experiences over the years, I now know that my mindset is actually quite rare, and for that I am grateful. I guess I'll thank my family since it's what I've always seen.

Here are 5 basic best practices for money management over time:

1. Contribute to a 401k - This is a long term game, and although I am in my feelings about the way my balance has been subtly depleting over the last few years, I still do think this is a great investment tool that is usually matched up to a certain percentage and is what will ultimately fund your future in some capacity. Max out on it if you can or contribute more as your income increases. Avoid dipping into it. Act as though it doesn't exist.

2. Eliminate credit card debt - If you can afford to, just pay it off, it'll be a weight off your shoulders. It won't disappear into thin air and it's only restricting your abilities to thrive and enjoy certain benefits. Most companies will negotiate old balances with you so you can settle your debt. While debit cards help you spend within your limits, credit cards offer amazing bonuses and benefits for the money you would have otherwise spent but knowing your limits will be important. The best rule of thumb - always pay in full.

3. Manage monthly expenses - Conduct a personal financial assessment.This can help you determine your spending limits and is always a good idea to see where your money is going, even if you do it one time. It has the potential to reveal forgotten subscriptions or help you think about what you use vs what you don't.

4. Save via direct deposit - This is probably the biggest piece of advice I can give based on my experience over the years. I've met the two extremes over the years - 1) the people who don't believe they have even a dollar to put towards savings monthly and 2) those who can afford to save to some degree but don't think it's worth the time to even set up, for the minimal annual savings total that they've already calculated in their head. To both of these extremes - I have this to say; 1) Try it - you may think you don't have anything to save but the key is to start small, set up automation and make it difficult to access (yes I'll save you from yourself) and 2) Try it - are you doing something else actively? No? Then saving even a small amount in a separate account is better than doing nothing at all. In both scenarios, overtime, you'll realize that you can add or subtract (which we should avoid at all costs) as needed. The most important thing is to start. While some people do not agree with the idea of having multiple savings accounts, this has actually helped me the most over the years. Brokerage accounts or high yielding savings accounts (I recommend online banks) are two great ways to start. Whatever account you open, set up an automated periodic direct deposit so you don't have to even think about it.

5. Get insured - I'll forever think that insurance is one of the biggest scams ever but I am also terrified of life without it. A good insurance product that kicks in when you need it the most can make all the difference in one's financial situation. Think about the insurance products you believe would be most beneficial for your lifestyle and your loved ones and do your research.

As a small business owner, it's not only important to understand how much of a personal investment will be needed to start your business venture, but it can be helpful to evaluate how you manage your own finances to determine whether or not you are in fact ready to add business finances to the mix.