It took me a dreadfully long time to understand this important truth: Money is not for spending. It is for managing first, and then for spending.
It takes courage to believe it, but when you do, it will profoundly change the way you think about and manage your money.
Imagine this: It’s Friday, a day you have come to know and love as Cake Day. You want cake, you love cake, and, doggone it, you deserve to eat cake. You stop at the supermarket and pick up the ingredients necessary to bake a chocolate cake.
The most bizarre thing happens on the way home. You can’t wait. You are powerless against this overwhelming desire to have your cake and eat it now!
You grab the grocery bag from the back seat (safely, while stopped at a red light, of course) and begin eating the ingredients because you are so hungry for cake. It’s there, it’s yours, and you simply cannot help yourself. You gulp a couple of eggs, and chew up some butter and sugar. You choke down a big handful of flour followed by a sizable scoop of cocoa powder.
You pull into the driveway completely disgusted with yourself. You try to hide the evidence, but it’s all over your face and clothes. The car looks like a bomb went off inside of it. But the worst part: Eating the cake was not nearly as satisfying as you'd dreamed. It was, in fact, horrible. Now you feel sick, ashamed, and embarrassed. You conclude there’s nothing you can do until next Cake Day. You suffer and beat yourself up for having been so incredibly foolish.
An absurd analogy for sure, but it does illustrate the foolishness of eating food that has not yet been prepared. The very same ingredients that made you sick could have become a culinary masterpiece had you exposed them to a recipe. Those cake ingredients were not for eating; they were for preparing first and then for eating.
It is equally foolish and unsatisfying to spend money that has not first been managed. To manage money means to take full possession of it, subject it to a specific plan, and then direct it accordingly. Picture a conductor bringing every musician into perfect order. That requires creating a season of ownership between receiving and dispersing.
Managing money is a learned discipline, a conscious effort that can produce immediate gratification.
When money flows into your life, you are responsible for what it does, where it goes, and how it performs. You are the boss. You can watch it drift away and out of your control, or you can manage it according to a formula, a plan—a specific “recipe” that you have developed and is a part of who you are.
It doesn’t matter if you are a single parent struggling to survive or the CEO of a prosperous business. You need to know ahead of time exactly how you will manage every dime that flows into your life.
There are certain elements that I believe should be part of your management system—elements like giving and saving. When you bring sanity and reason to the management of your income, feelings of dissatisfaction, worry, and hopelessness quiet down. You find yourself looking for ways to plug the money leaks in your life.
So, what is the best recipe for managing your money? Here’s a simple recipe: 10-10-80. Give away 10 percent, save 10 percent and then live on 80 percent of your income. That’s a formula that just works.
No matter your situation—single, married, old, young; whether you’re deeply in debt, unemployed, or at the top of your career—you need a system through which to process every dime that enters your life. Only then will you fully understand why money is not for spending. It is for managing first, and then for spending.
