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Why most leaders suck at personal cash management: October 6, 2010

Posted by John M McKee in "John M McKee", 21 Ways Women in Management Shoot Themselves in the Foot, Action Plans, business success, Coaching, executive coach, leadership coach, business consultant, career advice, life balance, Personal action plans, quality of life, The Four Windows Process.
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Most managers are inept when it comes to managing their own cash and personal finances.  And today – more than ever – one needs to be more conscious about how they look after their financial situation, especially their cash flow.

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Over the years, as both an executive and as a coach, I’ve witnessed something about managers and leaders over and over:

Many make ample money but are, technically speaking anyway, bankrupt.  They owe more than they own.  They’re entirely dependent on their paychecks to make even the minimum monthly payments, in many cases.  And the situation doesn’t neccessarily improve as they get promotions and raises during their careers – they simply start spending more so they still end up in dangerous waters.

At my coaching practice, Business Success Coach.net, we use The Four Windows Process in our client coaching.  Simply put, it’s predicated on the belief that each of us has 3 key aspects which combine to determine who we are.

These 3 aspects are:

Career side – This is the side of you who goes to work each day to earn money while working at something you’ve chosen for a job or career.

Personal / family aspect – This is that part of you which focuses on doing things which replenish you, with your friends and loved ones.

Finance element- This is the aspect of your life focused on how to manage the money you have over the short term and long run.

When properly done, using a plan and ensuring balance between them, they can create a life of great satisfaction.  However, if one or more of these life elements are not looked after, the result is often an individual who, despite some good successes – for example in her/his career or personal life – is very dissatisfied with their life overall.  Very frequently, it is the financial management aspect of their life that has them disappointed and frustrated.

Here’s a quick quiz to see how you’re doing.  Give yourself 1 point for each one you answer “yes”:

1. Do you know your actual monthly cash burn rate (how much you always spend)?
2. Do you know what your total monthly fixed expenses (the minimum you must spend to live) are?
3. Do you have a savings plan?
4. Are you keeping to the plan you made?  (eg: is it growing as planned?)
5. Do you have at least 3 months of cash for an emergency fund?
6. Conservative planners have 6 months. Do you?
7. Do you pay off your credit card balances at least 9 months out of 12?
8. Are is current total debt load (value of all you owe to anyone) lower than it was 12 months ago?
9.. Do you know your net worth (value of all you own less the value of debt including home)?
10. Do you rely on a bonus or other financial incentive to play “bill catch-up” each year?

Rating scale:

10 – please call the Commerce Secretary & offer to fix the US. We need you out there!
9 – awesome! You are one of a very few who are doing it right and you’ll reap the rewards
8 – excellent job – stand up and take a bow before the rest of the world!
7 – Nice work – with a little more focus you’ll be in a great place
6 – Good – you’re doing better than most people, but more effort is needed
5 – Seems like you understand the mechanics but need to be more dedicated
4 – You may want to consider marrying someone for money.
3 – This is not good.  You are in dangerous waters. Get involved. Now.
2 – A little better but you’d better start buckling down before it’s too late.
1 – This is serious.  You need to start getting more involved before it’s too late.

Here’s to your future!

John

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