Personal Finance Series: No 4 - Happy? Why You Can't Be Bothered!

The study of happiness is becoming increasingly mainstream, and in applying this new science to the understanding of personal finance, financial planning, money management and financial goal setting, there are a specific set of characteristics which identify how people are happy with money.

Although very few people admit to being happy with money, or happy with personal finance, happy people do not wait for things to come to them, they get up, get out and get stuff done.

They volunteer their time, and move on from difficult circumstances quickly. Happy people take action, they are proactive, and to understand how to become money-happy, it is useful to understand the opposite position.

Happiness: The Reasons Why People Don't Take Action

You don't need a financial planning degree, or embarking on a financial planning career to be able to take action with personal finance worksheets, yet the most obvious reasons for not taking action include laziness, guilt and depression.

Some people just ignore their money, and even though they understand that doing nothing is damaging, they don't have the motivation to do anything about it. This often leads to guilt and depression - but not action!

Also, many people not talking action with their personal finance generally believe there is not much point in doing so. They can't 'see' the bigger picture of things like goal setting motivation theory, or investing to make money because they have low self-esteem.

Happiness: How The Brain Solves Financial Problems

Mainly, people react rather than prevent, which means the path to financial happiness is far from smooth, and it depends largely on the degree of discomfort being felt, the amount of pain each person is in. The brain does have some degree of regulation in that most people can get to the point where they realise that they " just cant afford it any more," but not much beyond that - unless helped by a system of personal finance budget software, or a home budget worksheet.

There are 3 ways the mind sorts problems

1. The 'long way round' is to break the problem into its logical sequence and seek the patterns in order to find a budget solution
2. Most people go by a 'rule of thumb' approach by measuring their solutions with their gut feel
3. The most creative is insight where the mind does some creative visioning about the financial possibilities

Happiness: How to Get What We Want and Keep What We Get

Happy people find an energy from within themselves or from around them, which fuels their kindness to others. They smile a lot and don't get embarrassed by laughing in public. They are responsible with savings, with an eye on security 'smoothing' for the unexpected rainy day! They are enabled by financial planning software, goal setting templates, affordability calculators,and are comfortable with managing their personal finance online.

The sequence therefore in proactivity is to;

1. Concentrate on a goal setting template, just as if you were doing goal setting in business and isolate big goals and little goals by naming them, identifying them and money-tracking them.
2. Set budgets for different aspects of lifestyle, set the rules, and stick to them.

By understanding why you don't take action, and how your brain thinks about money, it is entirely possible to manufacture the conditions under which happiness can be achieved. When this is supported by proactive, online tools which take all the hard work out of managing money, "why would anyone choose to remain unhappy?"

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Resolution for fixed deposit Loan

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CAR INSURANCE MANAGEMENT CO. LTD

Resolution in writing of the Members of the Car Insurance Management co. Ltd Condominium Plan No. XXX adopted by circulation on 30^th October,  2013

FIXED DEPOSIT OVERDRAFT FACILITY          - PEOPLES BANK

                                                                          LKR 2,000,000.00

                                                                          Current Account No: 30XXXX22553XXX5

We the undersigned being the Council Members Of the council of Car Insurance Management co. Ltd, Condominium Plan No: XXXX (hereinafter referred as the ”Management Corporation”

HEREBY RESOLVE:

That the Management Co. Ltd obtains an overdraft facility of Rupees Two Million (Rs. 2,000,000.00) only from Peoples bank, XXXX Plaza, against the following fixed deposit certificate for Rupees two Million two hundred and seventy one thousand five cents seventy eight ( Rs. 2,271,005/78 ) of Liberty Plaza.

Certificate No	Rate	Amount Rs. Cts
3XX-60-01-000XX783-X	10.5%	2,000,000.00

FURTHER RESOLVED:

That any Directors of the Company be and are hereby authorize to sign any document in connection with obtaining the above facility

NAMES OF THE COUNCIL MEMBERS                                    SIGNATURE

Mr. XXXX Jathilaka                                                     ……………………………..

Mr. D. Herath                                                              ……………………………..

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The Importance of Personal Finance Budgeting

Finance is often made more complex than it needs to be, and proper personal finance budgeting to build wealth need not be stressful. Simply by following a few simple basic rules of personal finance your budgeting will not only get you back on financial track but begin the process of wealth creation that we all deserve.

The principles of a sound wealth building system all require the foundation built on personal finance budgeting. Solid and consistent budgeting is one of the laws of personal finance that you break at your own expense. The cost of not following your money, and knowing how your money flows in and out of your possession is dear, and a very common mistake. But, what are the principles of successful budgeting.

The first principle of personal finance budgeting that comes before any dreaded calculations or budget sheet assessment is to remove all the emotion from your finances. This is the hardest and most important of the personal finance budgeting secrets to be revealed. If you find yourself wracked with debt anxiety, overwhelmed by countless financial obligations, or just simply hate counting bills and income, you are not alone. But it is an essential and important to take effort to remove any emotion from this process. You are simply counting numbers,, to paint a map of where you are now, and to measure progress towards your wealth destination. Removing the emotion from your personal finance budgeting will be a work in progress, and you should always remain on guard for its returning.

The next step to when personal finance budgeting will be to compile a list of both your assets and your liabilities. With this step in the budgeting process we are trying to evaluate your net worth. You simply need to make a list of what you own, assign each item a number as to what it could be sold for, or its current worth, and subtract from this list what you owe. For example, if you own a boat that can be sold for $1500 and you still owe $750 you would be left with a value of $750 that could be considered a part of your net worth. By determining these numbers in personal finance budgeting we are able to a better idea in the broad sense of what you are worth financially.

Following the determination of your net worth, our next budgeting step is to determine what your dynamic finances are. This sounds more complicated than it is, I am only asking that you make a list of what your monthly income sources are and how much you bring in each month from these income streams. We then need to compile a list of your monthly expenses, what they are and how much the subtract from your monthly income. Proper budgeting your personal finances means leaving no expense or item off the list, no matter how small, account for everything. This budgeting task reveals to us the speed that you are travelling with your finances, either to financial ruin or towards your wealth building destination.

You have accomplished all there is to wise personal finance budgeting. You are now capable of assessing what your worth is, and have an idea of what your destination is (your wealth building goal), and you know at what speed you are travelling towards it monthly. Your budget provides you with a clear understanding of where your money is and how it is flowing. With this information you can now make wiser decisions and streamline your finances, all with the help of a little personal finance budgeting each month.

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The Best Way to Understand Personal Finance

When we are trying to understand Personal Finance, the best thing to do is to understand what Personal Finance is NOT.

Many people think that accounting and personal finance are the same, but Personal Finance is NOT Accounting.

On the surface they may seem the same; they both have something to do with money. However, the definitions will help us better understand the differences.

Merriam-Webster's definition of accounting is "the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results."

Based on this definition, we see that accounting is the process of analysing and recording what you have already done with your money.

This is why having an accountant is usually not enough when it comes to your personal finances.

Accountants generally don't concern themselves with personal finance (there are some exceptions to this rule). Unless your accountant is also a financial advisor or coach, he or she will likely just look at what you have done with your money at the end of the year and provide you with a report of their analysis.

This report is usually your tax return; what you owe the government or what the government owes you.

Very rarely does the accountant provide an individual with a Balance Sheet or Income Statement or a Net worth statement; all very helpful tools that are necessary to effectively manage your personal finances.

Personal Finance is looking at your finances from a more pro-active and goal oriented perspective. This is what provides the accountants with something to record, verify and analyze.

The Merriam-Webster's (Concise Encyclopedia) definition of "Finance" is the "process of raising funds or capital for any kind of expenditure. Consumers, business firms, and governments often do not have the funds they need to make purchases or conduct their operations, while savers and investors have funds that could earn interest or dividends if put to productive use. Finance is the process of channeling funds from savers to users in the form of credit, loans, or invested capital through agencies including COMMERCIAL BANKS, SAVINGS AND LOAN ASSOCIATIONS, and such nonbank organizations as CREDIT UNIONS and investment companies. Finance can be divided into three broad areas: BUSINESS FINANCE, PERSONAL FINANCE, and public finance. All three involve generating budgets and managing funds for the optimum results".

Personal Finance Simplified

By understanding the definition of "finance" we can break our "personal finance" down into 3 simple activities:-

1. The process of raising funds or capital for any kind of expenditure = Generating an Income.
A Business gets money through the sale of their products and services. This is labeled "revenue" or "income". Some businesses will also invest a portion of their revenue to generate more income (interest income).

A Person gets money through a job, or a small business (self employment, sole proprietorship, network marketing or other small business venture). The money coming in can be a salary, hourly wage, or commission, and is also referred to as income.

A Government gets money through taxes that we pay. This is one of the main ways that the government generates an income that is then used to build infrastructure like roads, bridges, schools, hospitals etc for our cities.

2. Using our money to make purchases = Spending Money.
How much we spend relative to how much we make is what makes the difference between having optimum results in our personal finances. Making good spending decisions is critical to achieving financial wealth - regardless of how much you make.

3. Getting optimum results = Keeping as much of our money as possible
It's not how much you MAKE that matters - its how much you KEEP that really matters when it comes to your personal finances.

This is the part of personal finance that virtually everyone finds the most challenging.

Often people who make large incomes (six figures or more) also tend to spend just as much (or more) which means they put themselves in debt and that debt starts to accrue interest. Before long that debt can start to grow exponentially and can destroy any hope they would have had to achieving wealth.

Personal Finance made simple

Personal Finance doesn't need to be complicated if you keep this simple formula in mind:

INCOME - SPENDING = WHAT YOU KEEP

For Optimal Results you simply have to make more than what you spend and spend less than what you make so you can keep more for you and your family!

If you are not actively working towards an optimal result you will by default get less than optimal results

It really is that simple!

Now that you understand personal finance and WHAT you need to do, the next step is learning HOW to do this!

The best way to start is by following these 3 simple steps:-

1. Know what you want to achieve - "if you don't know where you are going, any road will take you there" has become a very popular quote, probably because it is so true. One of the habits that Stephen Covey highlights in his book "7 Habits of Highly Successful People", is to always start with the end in mind. Knowing where you want to go will be a big help in ensuring you get there.

2. Have a plan - that you can follow that will get you to your goals. Knowing how you will achieve your goals in a step by step plan is invaluable. Sometimes this is easier with the help of an advisor or a financial coach.

3. Use tools and resources - that will help you to stick to your plan and not become distracted by the things in life that could limit our incomes and make us spend more than we should. Don't try and work it all out in your head! You will end up with a massive headache and your finances will become one gigantic dark fog!

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Thank you Letter for sponsor

20^th November 2013

Capt. Janaka XXXXX

(Managing Director)

XXXX Security Services

No: 52/58

XXXX Plaza

Ja-ela

I sincerely appreciate your kind response On behalf of the XXXXX XXXX Management Corporation and would like to thank the generous sponsor of Rs. 20,000.00 (Cheque No:122532 Sampath Bank Ja-ela) for our Annual Trip on 24^th November 2013.

Thank you all again for your thoughtfulness, generosity, and Continued support to the Liberty Plaza Management Corporation

Thank you

Most Sincerely

………………….

_ _ _ _ Kumara

(Accountant)

XXXXX XXXX Management Corporation

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Refferance Letter

 

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19^th November 2013

Director General of Customs

Srilanka Customs

No : 40, Main Street

Colombo 01

Dear Sir

Reference Letter On The Janitorial Service Rendered By XXXX Environmental (Pvt) Ltd

I confirm that the above mentioned company provided us janitorial service for 10 years and 3 Months from 01^st August 2013,(01/08/2003) and our overall satisfaction on the janitorial service provided by them is as follows

Level of Satisfaction	Tick appropriate cage please
Very good  -(Over 90% satisfaction on the janitorial service provided)	X
Good          -(Between 75 – 89%)
Average     -(Between 50-74%)
Poor           -(Below 50%)

My contact No is 011-2576605

…………………….

Signature                                                                  K _ _ S Gurusingha

                                                                                (Accountant)

                                                                                Car Insurance Management Corporation

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Advance Payment Confermation letter by contractors

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08^th November 2013

The Finance Manager

M & E XXXXX Engineering Pvt. Ltd

122, Holl Street,

Colombo 02

Dear Sir

Confirmation of advance payment as at 31.12.2013

Our Auditors, GDFP (Charted Accountants), are performing an audit of our financial statements. According to our books, we have paid a sum of Rs. 7,653,545.13 to M & E XXXXX Engineering Pvt. Ltd as advances on Fire Detection System

For audit purposes, it is necessary that you confirm the payments as correct or otherwise, for this purpose, please advise them in the space provided below whether we have paid you the above advance payments.

Your prompt response to this request will be appreciated

Very truly yours

………………………….

K K N S Kulasekara

Our records indicate that an Advance payments of LKR  …………………………………… Was received by us from Car Insurance Management Co. Ltd as of 31^st March 2013

By ____________________________

     (Name)

     ____________________________

     (Title)

     ____________________________               

     (Date & Signature)

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