MoneySkills with Nelson Letshwene

Money & the psychology of money

The Money Game | How do you know you’re making progress?

A credit card, the biggest beneficiary of the ...

A credit card, the biggest beneficiary of the Marquette Bank decision (Photo credit: Wikipedia)

“You are not free to give up freedom, but only to deny it.” ACIM

How do you know you are making progress in anything? All plans are meant to be roadmaps. If you follow your plan, you can always look back to check how far you have come.

Most, if not all American sports are filled with statistics. When they say someone was man of the match, they have the numbers to prove it. The scorecard can prove it for you even if you didn’t watch the game. In soccer, on the other hand, man of the match is based on a judgment. There is not a lot of statistics to prove that. If you were not there watching that game, you will just have to take the word of those who saw the game that that particular player deserved to be man of the match. This more so if the judges chose a midfielder who neither scored a goal nor saved a goal. For you to make this judgment you must be a good reader of the game.

The money game is a mixture of statistics and judgment. You cannot ignore the numbers. But you cannot ignore judgment in favour of numbers only. Stock market investors for example, will of course look at the numbers. But all numbers produced are based on the past. The future projections are based on judgment. In playing the money game, you have to start with the numbers, and if you pay attention, the numbers can teach you to develop judgment. The biggest question in personal finance starts with “how much …?”

How much is your income now and by how much would you like to increase it? What can you do and what are you willing to do to bridge that income gap? How much are your expenses now and by how much would you like to increase or decrease them, and what would you have to do to reach that goal?

How much are your assets now? This means your real assets and your “virtual assets”. Your real assets are your tangibles over which you have no debt; your savings and cash. Your virtual assets are your paper assets – shares for example, or equity in your home. They are not real until they’re realized, that is, turned into cash. How much debt do you have now and by how much would you like to increase or decrease that debt. What are your reasons for being in debt and what is your plan for managing or getting out of debt?

How much protection do you have in terms of insurance? How much more do you need to be fortified? How much have you set aside for retirement now, how much will you need in retirement, and what do you need to do to close the gap?

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One comment on “The Money Game | How do you know you’re making progress?

  1. koorapetse modise
    March 25, 2013

    Which books do you have in stock about financial planning or anything to do with personal finance.How much is a copy

    Like

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This entry was posted on March 20, 2013 by in Uncategorized and tagged , , , , , , , , .

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