I spent imaginary money in an imaginary way today. I really wanted to buy a new bass guitar. The bass guitar I have is broken and I really wanted to replace it. There was a used bass guitar at the music store today that was in excellent working condition, sounded amazing, and was only $149.00. I walked through the purchase process in my mind, I justified the purchase, I had explanations of where the money would come from *cough* economic stimulation *cough* and then realized that I was uber-lusting over that which I had no money for. The problem in all that I wrote in the sentence before was the phrase “would come from.” I would get money later that was wind fall income and instead of being a good little boy and doing what I should with it, I was ready to compromise my family’s income and financial future for a bass guitar that I didn’t need, I just wanted it for my own personal use.

I finished doing our 2007 taxes today. Papers are printed out, two checks need to be written, and on Monday we’ll mail the taxes and checks out to the federal government and the state of Colorado. I was hoping that our checks would be smaller together, but I am proud to say that our federal check is only $100.00. Given that I have had to send thousands in past years, this means that we’ve managed to calculate, pay and balance our tax cycle. Our state check was higher, but next year I think we’ll have it nailed pat. Furthermore, since we are sending in less in taxes we’ll have more money to put down on our debt reduction snowball!

I don’t love taxes, but I sure do love having gotten the numbers closer this year. As weird as it sounds I can’t wait to find out about next year’s taxes because I’m ready to be even closer (or possibly get a very, very small refund check because we maximized deductions and credits). I believe there are a few more things that are certain besides death & taxes, but I’m glad to have 2007 behind me.

Bonus: The number one thing that ended up saving me more than I expected (for some ignorant reason) was donations.  We donated stuff to Goodwill as well as supporting various missionaries, our church, and World Vision.  If you’re looking for ways to make your 2008 count, this may be a good way to do so.

Have you ever wished you had an extra $200.00 a month? I know I used to wish that. The moved buffer theory is the theory that you should be putting the buffer in your budget at the ‘top’ of the budget rather than in each category. A buffer is an excess amount of money that is put in place to deal with a greater demand on your finances than is normal. If you’re familiar with “emergency funds” then you might describe the buffer as a preventative emergency fund built into your plan. If you are like me then you originally set up your budget with the buffers into different categories so that each category could absorb fluctuations in the category.

Evaluate the chart above representing a traditionally buffered set of categories. Can you see that the categories with buffers are theoretically more likely to use the buffer? By giving yourself access to more money you are more likely to absorb the buffer. The problem is that you should have some buffer somewhere because in real life all of the numbers are not known ahead of time (unless you are super lucky). By setting yourself up with a ’safe’ budget you are more likely to overspend potential savings (which is not the same as blowing out every budget category in overspending).

Instead, I would propose that you actually calculate a conservative amount for each budget category. What would you say to cutting each category by 20% and moving that buffer into its own category that goes untouched and your target for expenditure is reduced? That way if you over-spend in a category (or the water bill shows up and you find out you took showers that were too long, or watered the garden a wee more liberally than you had expected) you have a buffer category with funds for paying the water bill, but you don’t find yourself likely to spend a lot more in each category. The weakest link in your budget, the category that you’re overspending on, is dealt with, and you can review it for next month to see if it needs more funds, but you don’t just feed all of the categories excess money each month.

There is little doubt that real life will happen, and the potential for surprises is great, but by taking out some of the waste where it didn’t appear to be in the first place, you may save yourself a lot more money in the long run. If you can save $50.00 a month in reduced buffer excess and put it into an investment fund, pay off debt, or possibly grow other areas of your life, its worth considering! I have begun to see a several hundred dollar a month buffer that I didn’t know existed because before I was spending it. Consider your choices as you budget. This method may not work for everyone, but for us, it has been a real relief.

Note: The Moved Buffer Theory Budget is based on the Theory of Constraints by Eliyahu M. Goldratt - only applied where I haven’t seen it applied yet. You might consider checking out Critical Chain, a book that applies the Theory of Constraints to business management.

If you want to be successful in life then there is one principle you must learn first: Learn principles. What makes a chef great? They know the principles of cooking and flavors and how they balance and then they can take unlikely ingredients and mesh them together into a signature dish. What makes an engineer great? They learn principles and then take those principles and apply them systematically to their work. What makes money managers great? They learn principles, apply them and keep their finances in order and grow their net worth.

Elementary school and primary school, and unfortunately some college classes tend to be about rote memorization. The best teachers I ever had were the ones who took the principles behind the things I was memorizing and taught me those instead of merely cramming data into my head. As a web developer/programmer I have memorized a lot of coding things, but I didn’t begin to think as a programmer until I learned the principles behind smart programming (sometimes called ‘patterns’). My finances were a mess even though I had heard good personal finance bits and pieces, but it wasn’t until I learned the principles behind sound personal finance (influenced by blogs like the Simple Dollar, NCN, and Dave Ramsey’s “The Total Money Makeover“).

Smart, successful people will be able to think with abstraction. They’ll be able to identify the principles that make up great process and then merge those principles, where they apply, to their different areas of expertise. Recently I read a book called, “Critical Chain” and it had lots of good principles in it. It is how I run my budget (which I posted a bit about before, but I’m going to write a further detailed article later), but it wasn’t how I ran my budget before reading it because I hadn’t clearly seen the principle. Once I learned it, I was able to see how it could apply to other areas in my life.

Learn principles, learn how they can be applied across broad scopes of your life, and then forget about rote memorization. It could save you thousands of dollars, millions of dollars, your life, or a few minutes time here and there, but get past the short term rules and start thinking bigger.

Genesis three is the most intense of the chapters of Genesis except for the other 49 chapters in the book.  It is intense, it has an impact on all of humanity, and its also the earliest prophecy of a Messiah [Genesis 3:15].  This chapter brings out the problem of greed.  Greed is the downfall of slow, methodical personal finance.  It destroys a paced approach by eroding away at the planned approach of acquisition and instead offers you the easy out: I want it now.When the serpent, being used by Satan, approaches Eve he pulls the deceptive maneuver that is not directly lying, but instead a slippery slope of questioning authority.

“Did God really say, ‘You shall not eat from any tree of the garden’?”

Are you really sure you want to wait for that large screen TV, new car, new house or Apple Mac Book Air [I had to put in the Apple reference - fruit jokes fit into this chapter well]?  Its not that the question is a straight out lie, its mostly that it appeals to the emotions and disengages the brain.  Eve falls for the fruit because of the plying of the serpent.  She pulls the fruit from the tree because it looks good for food and because she is uncertain of God’s actual response.  Adam, standing with Eve, buys in, too and bites the big one.Debt based purchasing is less than ideal.  Greed based purchasing through debt is even more catastrophic.  Instead, as a steward of God’s money the believer should evaluate the cost, evaluate the consequence, and evaluate the usefulness of the purchase.   The consequences of the bad choice of Adam & Eve eating the fruit of the tree of the knowledge of good and evil have impacted all of humanity [That's called federal headship, and it took Christ's starting a new federal headship to break the relationship of mankind to sin].  Eve was the first woman to eat her family out of house and home, but there have been others.  Others who have gambled, spent, destroyed or otherwise damaged their financial life due to bad choices and others watched by glibly, but without the confidence to correct the problem and intervene.The consequences for Adam & Eve were multiple, but you and I work for financial stability as a direct result of his failure to lead his wife into purity!  The dominion that Adam had over creation was removed from him, the ground became difficult to work with in producing fruit (Adam did work before the fall, he tended the garden, but the labor was easy), and the cost of reproduction was significant and comes with pain now.  Of course death (which means separation from God, and not annihilation) is also a consequence of this poor choice and greedy maneuver.As we make choices with our finances the long term impact should be in our scope of evaluation.  We know that money doesn’t transfer to our heavenly life, but we need to make sure that our heavenly life (Colossians 3:1-3) is impacting our transfers and transactions here on earth.

Pardon my American term of soccer those of you who call it football. I blame my parents, they called it that because football was an awkward game with very large men attempting to damage one another while not getting damaged themselves. Its like politics only with more distinguishable words that the common man feels comfortable with. You see, my wife wants to sign up the girls for soccer [read: football/futball]. I want to sign them up, too. Just not for a combined total of $270.00. I’m going to declare that watching them play it is fun (we went to a free day where they could practice with a coach so as to hook us into the program). Its greater fun than watching the politicians for sure.

Our getting out of debt budget simply doesn’t have a $270.00 gap in it. Maybe if we saved up for a few months we’d have enough, but that would be money we’d be taking out of debt deduction instead of money going into the debt reduction process. In short we’d be paying our way out of debt for several months longer (or to put it in my wife’s terms: delaying our cash-only anniversary trip). In my mind its not worth it. I’m more than willing to do it once the debt is gone, but at present putting the debt as a lower priority feels like a violation of all that is mostly good (except for the politicians who are mostly not good).

So we’re going to have to discuss this because while we could eek it out of the zero budget, its not my first choice.  We love our girls, we love to see them get exercise and fun, we love to see them get the opportunity to dominate spheres and cause mild pain and suffering in (non-competitive youth) soccer, but this may just have to wait for one more year to go by.  We think next year we may just have all or most of our debt paid off.  Maybe we can buy a soccer ball and kick it in the backyard.  I know it isn’t the same, but neither is American Soccer and Football.  I blame the politicians.

Apparently MSN thinks that spending all of your income means you’re middle-class.  Or at least that is the picture painted in this piece of journalism.  My sister sent me that link and she was aghast at the stupidity of the content there.  Watch the video, if you can stomach it.  There is such a prevalent mindset that ‘having’ is middle-class.  Instead lets ditch the class system and go for accountability.  Class is about stuff, but we’re not concerned with stuff.  If you read various books like “Millionaire Mindset” you’ll see that there are plenty of ‘middle-class’ looking folks who are actually very, very wealthy, they’ve just figured out how to be wealthy by spending less than they make and investing the rest wisely.

Don’t spend as much or more than you make, making more later will just be more to spend.  Instead, start early, start often, and start saving.  I don’t watch Oprah regularly, but I do remember an interview of her where she said that her dad told her to save half of her income… and she has.  And now she’s a multi-billionaire.  You don’t get there from spending, you get there from saving.  Save the ‘middle class’ by saving, not spending.

This last year, for half of the year, we had a high interest savings account with WaMu.  That account held quarterly tax money for us while we waited for the payment cycle to kick in.  In the past that money sat in a savings account earning us nearly nothing.  That’s the power of letting money work for you while you work on something else.

The amount of money that fluctuated in that account was pretty substantial.  The account would go to almost zero every time we’d pay taxes, but then over several months time it would climb back up to make us more money each month.  This up coming year, assuming we’re able to have the whole year instead of half the year we should be good for closer to $180… at least in theory.

If you have money sitting in a ‘regular’ savings account I strongly recommend you find a higher interest account or a money market account.  It could mean the difference between $1.00 and $100.00.

Part one of what will probably be a multi-part series on The Ultimate Money Maker. This is probably a mythical concept for the average person if they are looking for someone else’s ideas. The Ultimate Money Maker is about 3 megabytes.

What do you believe about this topic?

If you have ever managed people then the manager-tools.com podcast series is for you. Why does this relate to money management? Because if you’re looking to get ahead to increase your income then you will need to be a better communicator and more than likely a manager of people as well as finances. The advice on that site is free (with for-money advice also available), the advice is practical, and it is sure to at least begin to prepare you for life in the wide-weird-world of management.

If you’re currently just an employee then you’ll want to listen to this stuff simply to learn how your manager may be trying to communicate to you. Sometimes managers don’t know that they’re doing a bad job of communicating and you may learn from these audio lessons how to help your manager manage better - heck, you may even want to pass them along to your manager.

If you’re a parent these are valuable because they even apply some things to rearing a child. And let me tell you: rears of children should always be managed. If you’re a manager you should listen to these because odds are you’ve never been trained to be a manager, you’ve just been thrown into it. I have recently been chucked in front of the wheels of an oncoming management train myself and this sort of thing is going to be handy.

I would recommend starting at the bottom of the page and working your way up so that you can get a feel for their methodology. Its not difficult to listen to and you’ll want to keep a pencil & paper or a word processor open to take notes. I have a page of notes from one podcast already and am just starting my second. This stuff is dynamite strapped to the body of a dead manager - go ahead and light the fuse… its attached to you.