Last March 23, 2010 I spoke at the Manila Bulletin Job Fair at the Glorieta Activity Center in Makati and in that talk I mentioned how job seekers can stretch their cash while searching for a job. I had a great time that day and I hope that my simple advice will go a long way for those still searching for that career.

In this article, I want to expound on this topic to include not just job seekers but literally everyone who is having a hard time in managing their money. I call this article Money Management Simplified because there are really just a few things you need to know if you really want to manage your money well. Like my experience in the job fair, it is my hope that this article will finally help you in getting to where you want to go faster with just a few key action points to do right now.

First, start with a blank sheet of paper and in the middle, write down how much money you have at this very moment. If you are married, I suggest you do this exercise with your spouse and combine both of your money right now.  Your piece of paper should look like this:

Good, now, I want you to write on top of that number, how much money (and your spouse if applicable) you take home every month. (Take home money is the actual money that comes in every month, whether from a job, a business, an investment, etc.). Your piece of paper should now look something like this:

Okay, now, I want you to write below, your total expenses per month, again, if you are married (and with kids), if you have loan payments, add everything up then right down how much expenses you have every month. Your piece of paper should now look something like this:

Great job! Now, the reason why I asked you to write down these three things is because this will be the simplified framework of how you will manage your money from now on. I want you to imagine that you are a cup of water, your “money right now” is the water level in the cup, your “take home money” is the money “pouring” in to you. Look at the drawing below:

Now, you are a very special cup of water because you have “holes” in your bottom, these holes represent your expenses. So here’s the complete picture below:

So, let’s analyze a bit,

Scenario 1: if my “take home per month” is smaller than my “expenses per month” then my money right now will eventually become zero or in other words, you become “bankrupt”. Yikes!, we don’t want that right. To show you what I mean, let’s go back now to what I asked you to write on that piece of paper.

Ex.

P15,000

P25,000

P30,000

Now here’s the simple money management formula that you will have to do to know if you are managing your money well

Take home/month + Money right now – Expenses / month = a Negative number; or a Positive Number.

In the example above, the formula will produce a Negative number and this is what happens to your money when this happens:

1st month:

P15,000

+ P25,000

– P30,000

= P10,000

(This is how much money you have left in your bank after the first month)

2nd month:

P15,000

+P10,000

–P30,000

= -P5,000

(You now don’t have money and you will need to get a loan just to cover your basic expenses. Not good.)

Scenario 2: But what if my “take home per month” is equal to my expenses per month then my money right now will remain at the same level. That’s good, but if you want to have more money, that’s not good enough.

Ex.

P30,000

P25,000

P30,000

In this example, the formula will produce a Positive number that remains the same month in month out and this is what happens to your money when this happens:

1st month:

P30,000

+ P25,000

– P30,000

= P25,000 still

(This is how much money you have left in your bank after the first month)

2nd month:

P30,000

+P25,000

–P30,000

= P25,000 still

(Your money remains intact. This is a better result, but not good if you want to have more money.)

Scenario 3: So what if my “take home per month is more than my expenses per month? Then my money right now will start to increase. This scenario is where you want to be. This is where you start to become financially smarter.

Ex.

P40,000

P25,000

P30,000

In this example, the formula will produce a Positive number and this is what happens to your money when this happens:

1st month:

P40,000

+ P25,000

– P30,000

= P35,000

(You now gained P10,000 more after the first month)

2nd month:

P40,000

+P35,000

–P30,000

= P45,000

(You gained another P10,000 This is where you want to be, this should now be your goal.)

Click here for Part 2 where I will explain how to get from scenario 1 to scenario 3. By the way, this method of money management is what me and my wife practice day in day out. This is called the “Simple Cashflow Method” which I have simplified even more to get as many of you started in managing your money properly.

Author box:

Mark So is a fervent businessman, forex trader and educator.  He is the Chairman and CEO of Businessmaker Academy—a business, finance and corporate training center.  He is also the Chief Forex Trainer of Forex Club Manila. Mr. So Graduated and is a licensed ECE, however his passion has always been in this order – 1.) Love for his wife and family, 2.) Making Money; and 3.) Teaching others how to make money as well. To read more of Mark’s interesting and life enriching articles you can go to his blog at http://www.markso.wordpress.com You may also email your comments and questions to:   markso@zerocapitalclub.com

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Comments
  1. People should be forced to perform this exercise before they start their own business. Many failures would be avoided!

  2. Jhon Rillo says:

    Thanks a lot for sharing, It broadens my knowledge on how to manage my money. I can’t wait to see scenario 1 to scenario 3.

  3. Jason Hebert says:

    Thank you for the money management information, I am new to the home business field and I have a hard enough time trying to balance my own check book never mind a business account. I do plan on putting this practice to daily use.

  4. kristina says:

    Thank you..
    I will wait for the next post.

  5. novie says:

    thanks mark! great adviser!

  6. mhadz says:

    i will read this article again so i can share this with my husband, both of us can use this method…

  7. Cielo De Leon says:

    Thanks for the information about money mgt… it gives me ideas on how i will manage my money properly. pls always update us more of your advices.

    thanks
    cielo

  8. wpd says:

    make sense…it pays to read articles like yours.. God bless

  9. LemLuanzon says:

    Another great article from the great Mark So :)
    I’m learning a lot and definitely wont miss the succeeding articles. God bless you always!

  10. anthony says:

    Dear Mark: thank you very much for keeping in-touch with me. I really follow religiously your column at the Manila Bulletin every sunday and without it, sundays seem not complete. One tip or advise that I would like to ask from you is the proper way to cost my professional service as a Dentist coz I am basing my professional fees based on the standard fees set by the local chapter of our dental society in Manila for uniformity purposes. What I would like to know is the proper way of making a Professional Fee based on the right accounting principle. May you help me regarding my query. Thanks and regards to your family. God bless you always. Dr. Toni

    • markso says:

      Hi Anthony, thanks for writing in. Thats a very common and great question I get from my students who attend my proactive sales and marketing course at Businessmaker. There are several ways to do it. 1) what you are doing is what i call competition based pricing, while that is ok, i suggest that you also look at a simple cost calculation to know if what you are charging is enough. Do the exercise on this article (money management simplified part 1) add up all your expenses for your practice. Lets say your total expenses per month is P50,000, next i want you to breakdown your Take home per month, so lets say your take home per month is P50,000 this figure = ave sales price x volume if your price is P500 /patient and your volume is 100 patients per month that = p50,000. So if you cannot add more volume, then increase your price to maybe P700 per patient. If the number of patients remain at 100 per month then your new take home will now be p70000 and your new balance will now have an additional P20,000 profit. If thats a better figure then you’ve got your proper pricing.

      Hope this helps. Of course you are always welcome to attend my sales and marketing seminar this Sat where i expound on this but also teach you how to increase your total sales with Zero costs.

      Best,
      Mark

  11. danilo pajaron says:

    Sir mark,

    for quite sometime, i just kept your blog recorded in my cellphone hoping to visit it one day until i finally opened it now. the initial presentation was indeed simple but it was very practical and truly enlightening. I am a retired military serviceman hoping to receive my pension arrears in substantial amount soon and I wish to invest part of it in a business or maybe in stocks. problem is i don’t have much knowledge about how this stocks operate aside from what i hear from people, also i haven’t thought much of having a business as again, i don’t know where to start except an invitation from a networking company selling variety of products? maybe i should or must learn more from your articles. many thanks sir. you help a lot of people particularly those who want to be succesful financially. God bless you.

  12. Noriel says:

    Hi Mr. Mark So,
    I am a retired seaman and my wife has stopped working since we got married 23 years ago.. I am now thinking of how I can manage my hard earned money before it gets depleted before I reach the age of 60. It’s nice to know that there are blogs like these to help people be financially independent. I think my wife & I have to really sit down, talk & apply these methods in our daily lives.
    Thanks & Have a good day!! More power !!!

    • markso says:

      Nice of you to write in Noriel, I hope that you indeed have a sit down with your wife to discuss this. It is never too late to start and may my blog and articles continue to help you in your life.

  13. […] How To Make Money Run After You (Part 1)The Most Important Advice about Money I Can Ever Give YouMoney Management Simplified (Part 1)HOW TO MAKE EXTRA MONEY WITH ZERO CAPITALMoney Management Simplified (Part 2)The Tale of Two […]

  14. patty says:

    thanks for this article..it is really simplified and can be understood by anyone. cant wait to read part 2 & 3 :)

    • markso says:

      Very Welcome Patty. Please do completely read parts 2 and 3 as it contains a LOT of really simple yet powerful methods to get your house in order financially. This is just the first set of assignments. Many, many more to come

  15. Ella says:

    True. Our Expenses should be lesser than our income. It is always good to live below our means. To become wealthy, we must maintain our lifestyle even if we get an increase in income. Raising our lifestyle with the increase in income would only cause us to break even. Great Article Mark! More Power!

  16. HP says:

    I have seen many different versions of the income/savings/expenses equation, but this version is the easiest to understand and has visual recall thanks to the cup of water illustration.

    Thanks.

  17. […] part one of this article, (Click here if you have not yet read it) I explained how to simplify your finances by just completing a few simple exercises on a piece of […]

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