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Take The Test On How You Rate on The Scale of Money Management?

Sep 16, 2008
Within the last few months, the news headlines have been dominated by bad news in the financial world. With the bank sector still facing challenging times ahead, the real estate sector suffering from falling house prices and reduced lending it all seems to point to the end of a decade that masqueraded itself as an economic boom.

It was built upon shallow foundations,therefore few people should be surprised by the speed of the economic correction measures that will inevitably follow an economy built on over borrowing.

When the words trillions of dollars of debt hit the headlines, it can be hard for most people to comprehend such a huge sum, but in reality the sum is made up from the vast personal borrowings of millions and millions of people. When you break the figure down to per household and per person, most people will find that they are part of the overall statistic themselves and until a crisis occurs it never really seems to be a problem.

I always refer to the Robert Kiyosaki rules about where you rate on the investing and money management scale as a measure on where you are starting from.

Money management level 1,if you spend a lot of your time hoping that things will work out in the end, or you have absolutely no idea of your outgoings in detail you are probably at this level. If you have some assets, they probably have debt attached to them, you may use credit cards impulsively, and you may have consolidated your credit cards at some time, and then started to charge up your credit cards again.

You may have all the latest cars and gadgets, but have used easy monthly payments to buy them with over the long term. You probably have no savings at all. The answer is not to always earn more or borrow more, but address your money habits.

Money management level 2,if you put aside a small amount of money on a regular basis in a low risk, low return account you are probably at this level. You may well save up for a special purchase, then buy the item which means you are back at the beginning.

You are actually saving up to spend. You probably hate credit cards and you like to spend with cash or debit cards only. It is good to have some savings, but you are risking wasting your most valuable asset which is time.

Money management level 3,if you are in this group, then you may contribute to your company pension plan, you may even have some stocks or shares, bonds or premium bonds. Generally you will have a solid education but you will probably lack financial literacy. You will not be trained to read a financial report, a balance sheet or an annual report.

You may feel investing is risky, you will probably leave the money decisions to the professionals, you may even be cynical of investing on the stock market yourself because you have heard the stock market crashes.

At this level there are often people who jump into penny stocks or the lottery trying to hit the big one, the one that will make it all easy. At this level it is very difficult to see what the next level looks like because on the surface everything appears to be OK, in fact just like lots of other people.

Money management level 4,if you are at this level you are actively involved in your own investment decisions. You will have a clearly laid out long term plan that will allow you to reach your financial objectives.

You will have invested time and money in your own education before actually buying an investment and you may well have come across or work with a competent financial planner.

If you are not yet a long term investor,get there as fast as you can you need to get rid of your bad debts quickly and learn about investing? Level 4 is a must if you want to live a more prosperous life. In fact everyone wishing to be financially free must complete level 4 first.

Money management level 5,this level is where investors can afford to be more aggressive with their strategies. They have good money sense and are focused. They have a long track record of winning on a consistent basis. These people are well educated in the world of investing and actively seek more information.

They will have developed a winning team of hand-picked professional advisers, and have a track record to prove it. They know how to still win even if the markets change and they are clear on their own principles and rules of investing. Their main focus is on increasing their assets and they reinvest their gains to build a bigger asset base.

They often know how the tax laws work in their favour and will have a team of advisers to manage their assets for them. They will often teach good principles to their children and pass on the family fortune to the generations that follow.

Spend some time over the weekend to find out which level you fit into, then work out a strategy on how to get to the next level.
About the Author
Diane Cossie has decided to stop waiting for her ship to come in and decided to swim out to meet it. She has continues her passive income march to financial freedom with her primary business Carbon Copy Pro. For more information about the opportunity visit: http://www.dianecossie-carboncopypro.com
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