It's amazing what you hear when you hear your friends talk about money.

For instance, there's a gentleman with whom I used to work. (He later changed employers and took on a multi-state consulting gig, but the two of us remain great friends now.) At the time, the business wasn't his own, but he was in a departmental-management position, and that was enough. He ran his department as if it were his personally-owned enterprise. His skills at detail management and problem-solving were well above average − often extraordinary. His straightforwardness and outgoing demeanor endeared him to everyone. His business performance and acumen earned him wads of respect.

In the several years I worked with him, our department flourished in customer-service areas. In the financial realm, it was like clockwork: Year-over-year performance numbers were obliterated. Consistently.

So it was a pretty big surprise for me when I discovered one day that his personal finances were so . . .

. . . ugly. And I do mean ugly.

We're talking disaster.

Bankruptcy. Monster debt. Humongous payments. Outflows for things I'd never dreamed of, including child support, alimony, and private military schooling for a son he hadn't seen in five years. Still making payments on a vehicle he no longer owned. Still paying for renovations on a house he no longer inhabited.

Here was a guy whose business intellect was so good, and his mind so razor-sharp, that sometimes it was almost scary. Monday through Friday, 8 am to 6 pm, he did everything right.

Unfortunately, like so many Americans, he found out the hard way that no matter how great you are at your job, when it comes to your personal life, you can't out-earn stupidity. Which begs the question:

Why didn't he manage his personal finances like he managed the business?

Though I don't have the hard data to support it, I bet most people don't regard their home and personal finances in the same way that they think of their business financial matters. In the business world, it's a pretty simple premise:

Either you make profits, or you close your doors.

Eventually (and it may be a long and painful "eventually"), people come to understand that it really is the same with your personal finances. But almost nobody treats it that way at the start, which is when it would do them the most good.

So why not? Why not manage your personal finances as if they were your business? And why not start doing it early?


    Expenses Must Answer to an Authority. . . You!

In my workplace, any departmental expense must be approved in writing by a manager. And those guys (the good ones, anyway), because they must stay within departmental budgets, tend to watch the pennies closely. So I've started doing the same thing at home: I pay strict attention to the pennies.

In addition to my all-out use of Quicken 2001, I keep a separate budget spreadsheet in Excel. Each month has its own spreadsheet, complete with a budget where all income and expenses get logged and accounted for. I write down my (estimated) designated amount of take-home income each month. I list out all known (recurring) and estimated expenses at the start of the month.

Once that's set up, I keep track of ALL my inflows and outflows. I want to know how my expenses relate to the income dollars I expect. I can tell at any given time how much of my money is or isn't already "spoken for." So if I want to go out and blow a little cash on a new computer game, or maybe send an extra payment toward a credit card balance, I know whether or not it's feasible.

Now, I've never personally known another human who detailed out their finances like this. If my coworkers saw my spreadsheets, they'd probably think I was nuts. Most people, I bet, just figure they can pretty well "keep track of it" in their heads. Well, that's the way I used to look at it, too.

I mean, there I'd be, standing happily in the computer-software aisle of Best Buy. As long as I knew approximately what my checking balance was − this was my mind reasoning feverishly − then I was okay to spend "X" percentage of it on . . . well, on whatever.

Cripes, was I wrong.

Even with Quicken, which is great for figuring out exactly where your money is going, you still need to have some idea of how much income will be arriving for the month − and how much of it is already obligated to your recurring expenses. Couple that with some "expected unexpected" expenses, and you can see right there in front of you just how much of your take-home pay isn't already spent. If you care about profit and loss in your personal finances − and you should − then trusting your current amount of "cash cushion" to memory is not a sound idea.

In essence, Quicken tells you where your money has gone. But the idea with the Excel spreadsheet is to stay ahead of the game:

You'll know whether you should spend the money at all.

Now, it's astounding what a written budget like this can do for your mindset. Recognizing that out of your likely income for the month, only $200 isn't already spent . . . well, this really makes you stop and think about what you want to do with that $200. It's a great deterrent when that fun-loving but not-altogether-reponsible part of you wants to stop at Home Depot or Best Buy on the way home from work.

And maybe it's just me, but knowing at any given moment just exactly how much "excess spendable income" you have left for the month is a pretty powerful feeling. You may not like the number, but at least you're not winging it. You're doing it right. You know where you stand. Unless you're acting out your own personal-finance version of the Enron saga, then your spending now has specific, concrete boundaries.

And that's a great start at control.


    Got Goals?

I bet a month doesn't go by without another book about goals and goal-setting showing up on the front table at our local Barnes & Noble. So I won't get in-depth here, but suffice to say that most successful businesses engage in goal-setting (and, by extension, goal-achieving) processes.

The point is that it's worth investing some time and study on the topic of setting goals for your personal life. These shouldn't be just for yourself, but also for your family. Taking the kids to Disneyland might have always been a dream of yours, but somehow you never had the time or the money to do it. Well, here's your chance to get started making it a reality. Decide that a face-to-face tilt with Mickey Mouse is your goal; now, write it down. Figure out how you can achieve it over time.

And remember: If the goal isn't written down, then it's just a dream.

And we all know how likely those are to becoming a reality.


    Try Carrying a Weapon

No, I don't mean an AK-47. I'm referring (for once) to something that isn't tech-related:

A clipboard, a notepad, or something like it.

Big deal, right? Well, the idea is to be able to jot down and remember tasks and other detailed notes ... no matter where you are.

My preference is for a clipboard stocked with a few sheets of college-rule notebook paper. It goes with me just about everywhere:   Work, home, weekend trips.

Remember the super-productive manager I wrote about earlier? Well, he toted a legal pad with him wherever he went. That included lunch, management meetings, and, yes, trips to the bathroom. (Okay, so maybe it wasn't a very sanitary notepad. The guy never asked me to hold it or anything.)

He'd write down numbers, dates, or statistics he wanted to remember. Each morning he'd write down the things he wanted to accomplish that day or week (no item was too small). I once saw him write down a television news anchor's quote that he didn't want to forget − and that was just one of all sorts of other trivial things.

It took me a while to figure out how this guy managed to get so much accomplished in a single day. But once I saw him and his legal pad in action, I decided that toting that "To-Do Notebook" around wasn't a bad idea at all.

As a matter of example, I spend a few minutes each evening with my clipboard. If I have any uncompleted items left over from that day, I copy them to the top of a new sheet, and toss the old one. (What can I say? It gives me some sense of resolution and progress.)

Then I write down any other tasks I'd like to get accomplished the following day. This would include items like "Set up online payment for electric bill," "Home Depot for new lawn-mower starting cord," "Finish ABC article for web site," "Send Nissan claims by end of day," and so on. If I suddenly have a brainstorm about a new page or topic for one of my web sites, the idea gets written down, and pronto. If I happen to overhear someone on TV talking about a new money-matters book and it sounds interesting, I write it down.

In total, I'd say that two-dollar Wal-Mart clipboard has made my life much simpler.

Why? Well, I used to be quite bad about forgetting lots and lots of "the little things." But now I know the secret:

Even the littlest things are tough to forget when they're waiting to be crossed off the page in front of you.

Michael | July 17, 2002

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