توضیحات ای جی

BEC : Finance -AJ

Hi, this is AJ. Welcome to my commentary. I’m going to talk to you more about personal finance on a smaller scale. I’m talking about finance on a smaller scale, meaning smaller numbers, smaller investments, etc. So I’m really talking about personal finance, meaning your own finances.

I think the key thing about personal finance is to think of your personal finances as a company. You know your own checkbook, your own bank account. You could even have your own balance sheet, if you owned enough stuff I guess to make it worthwhile. So you would run your own personal finances just like a company. You would think like a company does.

This is what rich people do. Rich people have their own finances organized in a way that’s very similar to a company. They run their own finances like a business. Most of us are taught or grow up running our own finances just kind of based on our emotions or however we want to do it. So we have money coming in from our paychecks usually and then we take that money and we go spend it on cool fun stuff that we enjoy.

We spend it on a place to live, of course. Maybe we go get a car if we’ve got money for a car. If we’ve got even more money after that then, I don’t know, we buy iPods and computers and stereos and whatever. You know it’s kind of endless. That’s not how most businesspeople run their companies. So if you want to get rich or even if you just want to have better personal finances, less stressful, then you really need to change the way you think about your money and think more like a businessperson. Treat your own finances as a business.

So you have at least one revenue stream, hopefully, which would be your job. So if you’ve got a job that’s a revenue stream. It’s a cash flow stream, right? So you know that every two weeks or every month or whatever a certain amount of money is coming in. Just like a company has money coming in from selling things, you have that money that’s coming in from your job and, basically, you’re selling something too. You’re selling yourself. You’re selling your services.

What would a company do? How would a business run its finances? Well, of course, it would have a way of keeping track of its income - its revenue. So you would have the income and expense statement and you would have a cash flow statement. That might be your checkbook or you could use a spreadsheet on the computer to track this.

The next thing companies do is that they track their expenses very carefully, so they categorize their expenses and they track them. They don’t just spend on a bunch of stuff and it just goes and they have no idea where it’s going to or they just kind of forget about it. That’s not what they do. Instead what they do is each expense gets categorized, meaning their bookkeeper or accountant puts that expense in a certain category.

So if the owner of the company buys a book about business and they pay $10 for it, well that expense gets put into a category. It might be the category of education or training.

They’re going to have some category for that and then every time anybody in the company spends money on training, on classes, on books, on materials, that expense is recorded and it’s out into that category so that each money they can look at how much money they’re spending on training or education for their employees.

If they spend money on rent, they’re paying money for the buildings their in, their office buildings, that again gets categorized. They put a label on that money and it goes into the category of rent or whatever it is they might call it, but basically they’re going to track it so that each month they know how much money they’re spending for rent or rent and mortgages.

This is true for everything. Everything that is spent is categorized, everything, so what they have they then in the end is a big spreadsheet, a big expense sheet. They can look at all the different categories and they can say well, we spent this much on rent and this much on people, this much on entertainment, you know entertaining customers, this much on training, this much on travel. They can really look at all of those expenses individually, you know by category.

This is something you can and should do for yourself. You can track your own expenses so that each time you spend money you put a label on it. You put it into a category.

o One category might be rent.

o One category might be travel.

o One category might be entertainment.

o One category would probably be food.

You might divide food into groceries and then you might have a different category for restaurants and eating out. You’d break it up so that you can really see where all your money is going every month and ever year so you’d get a nice clear picture of your expenses.

That’s what a business would do and so that’s what you can do with your own personal expenses. It’s an important first step so you really know what’s happening and you might be surprised. You might look at it and say wow, I spend a lot of money on restaurants or oh, my God, look at all this money for entertainment or I didn’t realize, but I’m spending a lot of money on travel, a lot more than I thought. You know whatever it is.

You might realize your rent is a huge percentage of your expenses. So, whatever it is, at least you get a clear picture on where lots of the money is going.

Now, the next thing businesses do, as we talked about in this whole lesson set, is they really look for places they can cut their expenses. Where can they cut their expenses, right? If you have the same amount of money coming in and you cut expenses that’s more profit. It’s an easy way to get more profit. You want to have profit in your personal finances too. If you spend every dollar you make you have nothing extra. It means you’re not saving. You’re not investing. You’re going nowhere. It also means you’re not very secure because if you lose your job oh, no, you have no income. So creating a profit for yourself is just as important as a company trying to create profit.

So the next thing to do after you have this expense sheet, you want to look at where you’re spending large amounts of money and really be honest and truthful about where you can cut. Now, I in my own life have been very, very, very tough about this at certain points in my life. Before starting my business I decided I was going to cut my expenses to almost nothing, basically because I wanted more freedom. I didn’t want to work too much and work a big full-time job and I still wanted to have plenty of money for things I enjoyed. So I cut my rent to basically nothing. I actually lived in car for a while, in a van.

I’m not saying you need to live in a van, but my point is that most people really spend more money than they need to. We all have this idea of what we should spend on the kind of place we have to live, the kind of car we have to drive, the kind of things we want to buy, but most of those things are luxuries not necessities. If you’ve got a lot of extra money then go for it. Have fun and enjoy all that stuff, but if you don’t have a lot of extra money, if you’re not getting a profit every month, if you don’t have a lot of extra money that you’re putting into savings then you need to cut.

I found in my own life rent is a great place to cut because it’s usually a huge expense.

So if your finances are tight, cut your rent. Go live in a tiny, small place if you need to or a smaller place. It might be a little less convenient, but it’s a great area where you can save money. Cars are another place. At least in the United States, that’s usually another big expense that a lot of people have --cars or car payments. Once again, that’s a great area to cut expenses. You can sell your newer car and then go buy some old, small, reliable car for much less money and in that way you can, again, reduce expenses, cut your expenses.

You have to be really pretty tough about this. All the advertising on television and all the messages we get from people usually pushes us to spend more money, wear nicer clothes, drive a nicer car, get a bigger house, which is exactly what those companies want you to do because they want you to spend your money, but for yourself you need to do the opposite. Cut your expenses. Live in a smaller place. Drive a cheaper car or none at all if you can avoid having a car. Look at all you other expenses too. Eat out at restaurants less if that’s a big expense for you. That was another big one I had and have reduced in my life.

The whole idea is to find as many areas as you can to cut your expenses, cut your expenses. By doing this, hopefully, you will create a profit in your personal finances, meaning at the end of every month you’ll have extra money. You’ll get money from your paycheck, you’ll spend according to your budget, especially after cutting things, and then you’ll have some extra money left over.

What a company would do with that money or a businessperson is they would invest it, right? They would reinvest it into the company. They would invest it in something, an asset that will produce more cash flow, another revenue stream. This is kind of the game, the big game of finance. Even at a small level it’s still the same game. So first you cut expenses or you increase your revenue.

That’s another great thing to do, by the way, get a better job and make more money, make your career go better. The problem is most people get a better job and then they immediately start spending more money to match the new paycheck so there’s still no profit. Their profit is still not good. You want to get a better job with more money, but keep your expenses the same or even cut your expenses so that the extra --the profit -you have in your own personal finances is bigger and bigger and bigger.

Then what you do, just like a businessperson, you take that extra, you save it for a while and then when you have enough you invest that into an asset. You invest it into something that will produce more revenue. This is a whole huge topic that I’m not going to discuss because it’s complicated, but there are many things you can invest in. You could buy stocks. You could buy a house, you know real estate and then rent it to somebody and make extra money from that.

There are many, many ways you can do this and I’m not going to give you personal financial advice because I’m not qualified to do that, but the basic idea is this though.

You take that extra money, you save it for a while and then you buy something that will produce even more revenue, even more cash. So you don’t just go buy something that’s fun and cool, you buy something that will produce even more cash so now your revenue grows. Now you have your paycheck plus this investment of whatever it is.

Then you same some more of that extra, you don’t increase your expenses or you cut them even more. You get more extra, more profit in your personal finances and then when you have enough you go and you invest in another asset. You buy something else, something else that will produce even more revenue for you.

This cycle never ends it just keeps going up and up and up. So your revenue starts growing, growing, growing and you keep your expenses low. Now, eventually, you can increase them a little bit, you know start enjoying some of that extra money a little, but always be focused on this idea of profit. You never want your profit - your extra money - to go down.

Each month or each year you should have more extra money to invest with. If your profit goes down, if at the end of the year you have less money, less extra money than you did the previous year then you have a problem and then you need to look at cutting more expenses and possibly also increasing your revenue even more.

So that’s the game of personal finance. Sometimes it’s not easy because we want to just do what’s fun and easy, live in a bigger place and all that stuff, but the people who succeed in their personal finances this is what they do. At a very basic level, this is what they do. It’s a very simple formula and it will work. It just requires some discipline to follow, so I hope you’ll follow it and you’ll start finding more and more and more profit in your personal finances.

The End.