If you were given $10 million dollars right now, what exactly would you do?

Most people would drop 90% of their responsibilities, buy things they couldn’t afford before, travel to places they have seen on Instagram, take care of their family, find out who their real friends are, and dump their significant other.

This is exactly what happens when you give money to a poor mind.

If you were to give $10 million dollars to a wealthy mind, they would say…

“Great! What would have taken me 20 years to do, I can now accomplish it in 5 years now that I have more resources.”

They wouldn’t drop 90% of their responsibilities, but would instead accomplish their vision more efficiently. For example: Rather than buying stock that would yield them 2.5% on dividends, they would buy a company that can yield them 10% profit margins from the bottom line.

They wouldn’t do things differently. They would find ways to do what they already planned on doing but more efficiently and effectively.

The truth is, this is the number one reason why most people will never reach financial independence.

No, I don’t mean because there aren’t enough $10 million dollar handouts.

What I mean is most people are taking actions only for the sake of money. Once they earn that money, they spend that money to express what they’ve been suppressing. Therefore, don’t have the opportunity to build wealth.

If your actions are conditional on money, then money is the master and you are the slave.

When you’re actions are unconditional to money and you demand money in exchange for the value/service you provide, then you are the master and money is your slave.

If you want to enslave your money, then you must first know exactly who / when / where / why / and how every single dollar is behaving.

One big lesson I learned from my accounting degree and auditing experience is that you don’t need to follow every dollar around to make sure it’s accounted for. Accounting is about creating a flawless checks/balances system that makes it impossible for anything to go unaccounted for.

What I’ll share with you today is my personal system I’ve created to manage my little green slaves.

This system is designed for my preference and is by no means a right/wrong system.

I highly recommend you only take what you like, leave what you don’t, and create your own system.

SET UP YOUR MONEY MANAGEMENT TOOLS

There are many different money management tools out there that can do many cool things like setting budgets, pulling in transactions, managing net worth, pretty charts & graphs etc.

Some people rely 100% on a single financial tracking software. There is nothing wrong with this, but let’s not forget the lesson Facebook recently taught us. There’s no such thing as a free service. If you don’t mind aggregating all your financial data, bank account login details, and investments into one database… be my guest.

I can do more customization by building a spreadsheet that is designed for my style rather than using any software that spoon feeds me my own data. I do have my university days to thank for this because we used to hand draw T accounts for transactions.

There are 2 tools I use to manage money coming in and going out.

The first is a software to automatically categorize ALL my expenses. I personally use www.mint.com, but there are many other options that have more bells and whistles. It’s up to you on which one you use, but I use them primarily for the functions of pulling in all my credit card transactions, automatically categorizing them, and organizing the monthly sum.

Here’s how to get set up:

• Sign up for an account at www.mint.com
• Link all credit cards and checking accounts (no investments accounts)
• Create your categories (recommended less than 10). Examples:
  • Transportation – Rideshare / train / gas
  • Fixed Utilities – Bills you can’t consider cutting off (phone / TV / Internet)
  • Luxury Utilities – Bills you can consider cutting off (Netflix / Gym / Magazines)
  • Business Expenses – If you have a small business. Larger needs separate books
  • Fun – Fun money (Movies / Bar / Road Trips)
  • Groceries – Money spent on food at home
  • Restaurants – Money spent on food outside of your home
  • Mortgage / Rent – Money spent on shelter
  • Shopping – Treat Yo Self
  • Education – Invest in Yo Self

Create accounts that compliment your lifestyle rather than box you into them.

The second tool I use is a google spreadsheet that I’ve designed myself here.

I found this to be the best option for me because:

• I can see a high-level overview of my financial structure
• I can create formulas I want and have 100% customization
• I can run projections by plug and play with numbers
• I can reference last year’s data on the same screen to know my benchmark
• I can change data relatively quickly to see when the change occurs
• I can leave notes/comments for myself in case I forget what some transactions were
• I can forecast different scenarios and see the impact in my long-term net worth

Some people may be intimidated by manually logging a sheet like this.

Honestly, you have to decide how much you truly care about mastering your money. If you care enough, this will be an effective tool.

If you don’t care enough, this will be a chore. I don’t recommend using this sheet if it’ll be a chore to you.

Here’s a breakdown of the spreadsheet design:

Here are the basic rules to the sheet:

• Any cell that is highlighted in LIGHT ORANGE is for you to manually input values into every single month.
• Any cell that is NOT highlighted is either filled with formulas or past data.
• The sheet’s panes are frozen above row 4 and before column F to keep you conscious of your net worth as you’re going through the rows and months.
• Column C is account names, change these as they suit you best.
• Column F is for you to know what last year’s numbers are as a benchmark. If you don’t have last year’s numbers available, I highly recommend you estimate it. This column expands your mind to know your numbers on an annual scale rather than monthly.
  • If you do decide to delete it, you’ll have to unfreeze and refreeze column F.
• Column D is super important because it’s the goal you’re shooting for.
  • Most people’s financial goal is to not be broke. It’s not a surprise why they’re always barely broke. Make a goal to achieve a certain net worth and you’ll get a realistic understanding of how much revenue you need to generate or costs you need to cut down.
• Column E is a YTD (year to date) column that sums up your 2018 annual numbers as you go. This column is designed to let you know how you’re doing compared to last year and the distance you are from your net worth goal.
• Row 4 is the MOST IMPORTANT numbers. This is your net worth at each given point in time. This is what I call the truth number. It’s the number that tells you what you’re worth if you were to ever drop everything, liquidate all you own and disappear.

Now that you understand the basic structure, let’s go deeper into each section.

The first section is ASSETS:

The definition of an asset is something valuable that you as an entity owns.

• Cold hard cash = asset
• Your furniture = asset
• Your car (if fully owned) = asset
• Your car that has a note = NOT AN ASSET
• Your house with a 30-year mortgage = NOT AN ASSET

Please don’t confuse a liability with an asset.

Some people think spending $20k on a down payment for house equals a $200,000 asset. That math doesn’t even make sense.

Let’s say your house is $200,000 with a mortgage of 30 years / 4.5% interest / 20% down payment…

• Your $20,000 down payment = ASSET
• You owe $180,000 in principal = LIABILITY
• You owe $117,196.54 in interest expense = LIABILITY
• Homeowners Insurance = EXPENSE
• Property Tax & Fees = EXPENSE
• Martha Stewart Kitchen = EXPENSE

So, tell me again how your house is an asset…?

Only when your total cost per month is lower than your tenant’s rent is when it’s a real asset.

But if you’re the tenant and only paying the cost, then the property isn’t generating revenue.

/EndRant

Here are the asset categories listed in the template

• Chase Checking
  • This is your basic checking account at any major bank (Recommend Chase).
  • This account is where ALL cash deposits are received.
  • I have a rule to never have more than $500 in this account. (dependent on your lifestyle). This rule forces me to be wise with my money.
  • The purpose of this account is to track everything going in and hold onto just enough cash that I need to spend.
  • This account doesn’t earn any interest and decays from inflation. It’s in your best interest to keep it as low as possible.
  • This also forces me to forecast my cash expenses better so I don’t get stuck with no cash. If you know you spend $1,000 in cash monthly, then keep a minimum of $1,500. You’ll have to decide what your tolerance is.
• Petty Cash
  • Petty cash is the physical cash you have on hand. I personally don’t track my petty cash because it’s always below $200. But if you really wanted to, you can keep receipts and count them up at the end of each reconciliation period.
• “Your Business” Checking
  • This is the cash you have in a business checking account.
• Schwab 90 Day Reserve
  • This asset is a 90-day cash reserve to have when life decides to happen.
  • I’ve determined that it takes roughly 90 days to bounce back from a major life change such as getting laid off, closing a business, moving countries, etc.
  • I calculate this amount by taking the average monthly cost of living in the last 3 months and multiplying it by 3. Everyone’s change tolerance is different.
  • I store this reserve in a Charles Schwab high yield checking account here.
  • This account is the base foundation of your financial structure. The rule is this account has to be full before you can consider investing.
• “Your Job” 401k
  • If your job offers 401k, only contribute to the amount the employers are willing to match.
  • Any other future contribution is very very stupid unwise.
  • For this row, I’d put the total value of the account.
• Total Investments (Principal Only)
  • This is how much money you’ve spent in total investments.
  • The reason why I say principal only is because gains/losses aren’t calculated until the investment has been converted into cash.
  • I don’t like to have my investments data on here because it skews your true net worth.
  • The principal amount is fair assuming you can cash out on principal only.
  • I use a separate sheet & software to track investments.
• Tax Reserve
  • This account is tax savings account for you to spend when it’s Uncle Sam’s birthday.
  • So many people get set back at the end of the year because they have to find the money to pay their taxes.
  • I don’t know why people do this when they KNOW it’s coming.
  • I understand you may not know the exact amount, but I think it’s fair to assume it’s the same as last year if nothing changed.
  • You can also estimate your taxes with many tools or talk to an advisor.
  • Take your estimated tax expense, divide it by 12, and contribute that amount automatically each month.
  • I store this reserve in a Chase savings account.

CALL TO ACTION

1. Fill in the actuals as of Dec 31, 2017. Note that these numbers are not totaled up numbers, but instead the amount at that period.
2. Fill in your goals you’d like for each account as of Dec 31, 2018.
3. Fill in your actual account balance as of January 31, 2018.
4. Fill in your actual account balance as of Feb 28 and Mar 31.
5. These cells moving forward will be automatically updated with formulas from inputs in another section. So you don’t need to do anything in these cells.

The second section is REVENUE:

The categories are quite simple. This is where you have all your streams of revenue.

1. “Your Job” Income is your consistent & steady income.
   1. For row 17, put amount the company sends you.
   2. For row 18, subtract out any pre-tax income.
   3. For row 19, subtract out any automatic deductions or contributions.
2. “Your Business” Income is any revenue generated from side hustles & businesses. If this is your main source of income, I would then use net income/loss rather than revenue.
3. Net Income from Investments is revenue you receive AFTER fees.
   1. This doesn’t count any investments that grew in VALUE.
   2. This is strictly for the cash you received from investment payouts
4. Other Revenue is any other revenue that comes in that is one time or unusual.

CALL TO ACTION

1. Fill in the actuals for total revenue you’ve generated in 2017.
2. Fill in the goal that you’d like to earn in 2018 for each source of revenue.
3. Update row 17 with actual figures you earned in Jan – Mar.
   1. Update row 18 with the pre-income tax rate in the formula.
   2. Update row 19 with your 401k contribution % in the formula.
4. Update figures in these cells with your actual earnings in Jan – Mar.

The third section is RECEIVABLES:

The definition of a receivable is any cash that belongs to you / earned that hasn’t been received.

1. NYC Security Deposit
   1. If you live in a rental, put your deposit amount here.
   2. Note that it’s the balance as of the end of each monthly period. Not accumulated.
2. Reimbursements / Debt In
   1. This account is to track any debt that is owed to you by a person or company.
   2. Once you receive the money, you’d then clear this account.
   3. I use the notes option on these cells just in case I forget what it was for.

CALL TO ACTION

1. Fill in the actuals for any secured assets you have as receivable in 2017.
2. Fill in the goal you’d like to have for each receivable.
3. Fill in the actuals of these accounts for Jan – Mar.

The fourth section is CASH FLOW:

The purpose of this cash flow section is to know exactly where each of your dollars is going.

• Cash into Chase
  • If you’ve set up so that all cash deposits start in the Chase account, then there should be no way any dollar can escape you.
  • Row 31 is the amount of cash that came into the checking account for the entire month.
  • This row is filled with a formula to pull from the total income you earned that month. But if things change, you can enter this manually.
• Chase to Rent / Mortgage
  • I highly recommend setting up autopay for this payment and recur it until the term is over.
  • Setting up autopay will take out the payment before you get to see the money.
• Chase to Schwab 90 Day Reserve
  • This is the amount of money you transfer the Schwab account for your 90-day reserve.
  • I recommend also putting this payment on autopay until you reach the goal.
  • If you have autopay, you won’t have to log the sheet manually. 
  • If you don’t do autopay, then you would have to log these cells manually. 
• Chase to “Your Business Checking”
  • Only use this row if your business doesn’t have its own checking account.
• Chase to Investments
  • This is the amount of principal you send to your investment portfolio.
• Chase to Tax Reserve
  • This is the amount of money to send to the savings account for end the year taxes.
  • I recommend also putting this payment on autopay until you reach the goal.
• Chase to Credit Cards
  • This is the amount you make at the end of each month to your credit card bills.
  • I recommend putting money here only after the 90-day reserve and tax reserve.
• Chase to Loan Debt
  • This is the amount you make at the end of the month to your other loans.
  • Get rid of this asap.
• Reimbursements Debt In / Debt Out
  • This is where you track money coming in or out for reimbursements
  • If it’s reimbursements coming in from money you spent in the past, log it here and manually balance out the receivable in row 27.
  • If it’s reimbursements going out from the money you need to pay someone else, log it here and manually balance out the liability in row 46.
• NET CASH FLOW
  • Row 40 is filled with a formula to net your cash in / cash out
  • The amount of Net Cash Flow is the amount of cash left over in your checking for that month.
  • If I keep a max of $500 in that account, this row should usually be below $500 or even $0.

This is a very very valuable section but can be easily confusing.

If you do this section right, you’ll never ask yourself “where did all my money go?”

CALL TO ACTION

1. Fill in all actual data in for all transactions from Jan – Mar.

The fifth section is LIABILITIES:

Liabilities is the #1 thing that eats away your net worth. Best to have close to $0 at the end of each month.

• Credit Card
  • I’ve set up so that all income comes into one account only. You also want to set it up so that all your expenses come out of one account only as well.
  • Right now, I only use one credit card for all my personal expenses. The best credit card that compliments my lifestyle is the Chase Sapphire Reserve.
    • This card has benefits designed for an ambitious traveler.
    • If this is you, use my referral link for a bonus 50k points after first $4k spend here.
    • Do you research on which is best for you, but make sure you take advantage of somebody’s credit card program.
    • Its rewards for the money you’ll spend anyway!
  • Row 43 will need to be filled in with the balance of your credit cards at the end of the month AFTER you’ve made your monthly payment.
• IRS Tax Due
  • This is the amount of liability you owe the government for that taxable year.
  • Estimate this amount to your best ability and use that figure to calculate your monthly tax payments.
• Loan Debt
  • This is the amount you owe for any personal loans
  • Row 45 is filled with a formula to subtract your payment that month. If your loan amount has increased, you’d then have to update this one manually.
• Reimbursements / Debt Out
  • This is the amount you owe to other people that you haven’t paid yet.
  • If you do make a payment in row 39, be sure to update this manually.

CALL TO ACTION

1. Fill in the values of actual liabilities as of Dec 31, 2017.
2. Fill in the goals you’d like your liabilities to be on December 31, 2018.
3. Fill in the actual liability you have as of the end of each month in Jan – Mar.

The sixth section is EXPENSES:

• Here is where you import in all the categories you’ve created from your mint.com account.
• You’re welcome to add to any other accounts that suit your lifestyle.
• These are going to be actual expenses incurred every single month.
• This section is designed to give you a realistic understanding of your cost of living.

CALL TO ACTION

1. Import / Create your expense categories in column C.
2. Fill in with actuals of your total expenses for each category in column F.
3. Fill in with your goals for total expenses for 2018 in column D.
4. Update with actuals of your expenses for each category for Jan – Mar.

This can seem overwhelming at first if you never tracked your finances this closely before.

However, I assure you that if you spend the time to set this up, you’ll never feel out of control of your money again.

RECONCILIATION

Once you’ve updated this sheet and it compliments your lifestyle, then comes the reconciliation.

I only do reconciliation twice a month.

Mid Month Reconciliation

On the 15 of every month, I log into mint.com and scan through all the transactions that have come in since the beginning of that month.

I then categorize it in the proper area and set up any rules for easier reconciliation as I go.

This is super useful when dealing with recurring type transactions.

I used to do it at the end of the month, but I learned that it’s easier to recall my transactions in mid-month.

Also, I can catch any overspending before it happens.

Mid-month reconciliation takes me roughly 10-15 minutes only.

End of Month Reconciliation

At the end of each month, I do the same transactional reconciliation as I did on the 15th for the rest of transactions that came in since then.  

After all the transactions are reconciled for the month, it’s time to update your new spreadsheet.

1. First, I update the Expense Section (row 49)
   1. Import in the final spend for each category from mint.com.
2. Then update the Revenue Section (row 16)
   1. Check all your sources of revenue and log what you earned that month
   2. Your total income will be calculated into row 23.
   3. This number will carry over to the next section to row 31.
3. Update your Cash Flow Section
   1. Double check your account to see if your total income (row 23) matches the amount you’ve actually received in the chase checking.
   2. In theory, it should match perfectly. If you received money elsewhere, log it in revenue.
   3. Confirm row 31.
   4. Row 32 & 33 should be auto withdrawn from your account and auto updated. If not, then update it manually.
   5. Now, take a look at your liabilities & assets and decide how to disperse your cash. I recommend paying yourself first before your debt.
   6. Once you fill the cells with actual figures, make sure you unhighlight the cells to be transparent. Remember the cells highlighted orange are the ones that need input.
4. Update your Liabilities Section
   1. For row 43, you’ll have to update this balance AFTER your payment.
   2. Row 44 & 45 can be used with formulas if the amount doesn’t rise.
   3. Row 46 will need to be updated manually if there is any activity that month.
5. Update your Receivable Section
   1. Update manually any changes here.
6. Update your Assets Section
   1. Fill row 7 with your ending Chase checking balance after all payments are made.
   2. Fill row 8 with how much cash you have on hand.
   3. Rows 9 – 13 should be automatically updated using formulas based on your input in the Cash Flow Section.
7. Once you finish reconciling for that month, make sure that column is no longer highlighted orange. This will let you know where you need to update next month.

End of month reconciliation takes me about an hour to update and reflect upon.

PROJECTIONS

Now that your money is being properly managed, here comes my favorite part!

Projections can sometimes be daunting when you realize how long it actually will take for you to pay off your debts.

BUT, projections can be amazing when you can see your net worth growing every single month from your actions!

I highly recommend playing with the numbers in future months when you have a big goal you want to be financially wise for.

Let’s say you want to take that long deserved vacation to Thailand.

You can do what most people do like try to spend less and make more until you have enough.

Or you can use this sheet to identify where you can cut monthly costs, increase revenue, all while handling your liabilities wisely.

I recommend also duplicating the sheet and run different scenarios to see how it’ll affect your net worth 1 to even 5 years from now.

The constant mistake most people make is they assume they make more than they do and they assume they spend less than they actually do.

In business, there’s a saying that you can’t grow what isn’t being measured.

Your personal finance is the exact same.

CONCLUSION

In conclusion, I hope that this article has brought even one idea of how to look at your finances differently.

There’s a term that I’ve seen become more and more popular in the recent years: adulting.

It’s used in a humorous way to find comedy in one’s real tragedy of reality.

When someone uses this term, it only highlights the level of enslavement to money.

If you were the master of your money and is now an adult, wouldn’t you then be traveling the world, doing what you love, going to places children cannot go, doing things children cannot do, and hiring people to do the things you don’t feel like doing?

It is no mystery that having more money gives you more options on how to choose to live your life.

If that’s true, then why don’t people care more about mastering their money?

I’m convinced that if people knew exactly how then they would.

I’ve given you a template system today and I hope that this will give you a power boost on your journey to become a master of your money and not a victim of your history.

If you liked this post and wish to see more, rate this article below!

If you want more hands-on guidance on mastering your money, email me for consulting at anh@anhesty.com.