You could be a very successful investor, but if you cannot manage your money, you will likely find yourself in a bad financial situation sometime in your life. You might be a cash machine, yet your lack of money management is letting all that you gain run away from you. If you want to secure a sound financial future it’s not enough to be a good investor, you must also be a good money manager.
Lots of people make lots of money and a good amount of those people will end up broke (or dangerously close) sometime within their lifetime. Why is this? It’s the result of horrible money management skills. When a greater and greater percentage of our capital inflows are allocated toward our monthly consumption habits, we begin to take on more risk within what we consider our ‘ever day’ lives. Thinking that the current state of affairs will perpetuate itself into the infinite future is a fools bet.
It pays to think defensively when considering the money you have under your control. What services do you use that are a waste? Or that you over pay for? What products have you bought that are useless? What products are you considering purchasing that will end up along the same lines? Where can you trim the fat? Where can you plug a money leak?
If all of your financial accounts are thought as a dam, you want to be filling the dam with additional funds (your offense), but what good is that inflow of funds if you have a dam filled with cracks that allow your funds to readily flow out of the dam? What kind of defensive mechanism is your dam, if it fails to hold?
Outflows are important. Don’t lose sight of them by obsessing over the inflows.
