In this short video, Shane Tenny, CFP® and Managing Partner at Spaugh Dameron Tenny, explains the six key money decisions that affect every financial plan.
Shane describes how decisions about earning, spending, saving, investing, borrowing, giving, and protecting your money work together to shape your financial future. By understanding these areas, you can make more intentional choices that reflect your goals and create a plan that fits your life, not just your accounts.
Dive deeper into this topic by reading the related blog: The 6 Money Decisions®
**
Transcript:
[00:00:04.820] Hi there, Shane Tenny, Managing Partner at Spaugh Dameron Tenny. Did you know that of all the decisions about money that we make all day long, and all week, and all month long, they all fit into one of six categories?
[00:00:18.990] This is kind of useful to know, because at the end of the day, a financial plan is only as effective as the decisions that we make to change our lives, and to change the direction we're headed. And so, it's helpful to understand the types of decisions that we're making.
[00:00:34.000] So, the 6 money decisions, in no particular order, are… Number 1, decisions over how we earn money.
[00:00:41.920] This one might sound kind of basic. Early in our careers, earning money is generally just getting a job and earning a paycheck.
[00:00:47.400] But as life progresses, as we find ourselves in more success and more opportunities, we're making decisions over how we earn money, which includes not just a paycheck, but perhaps a side hustle or a side gig. We are earning money through investments we make, or real estate, or the ownership of a business or a building.
[00:01:07.030] In general, for clients that are more successful, the income they're earning is becoming to snowball and develop a scale and a magnitude that can be difficult to track. And so we're needing to make decisions over how and what type of money we're earning.
[00:01:24.340] Of course, the second key money decision is over how we spend money, and that's expenses today, expenses we expect in the future.
[00:01:32.790] The difference between our fixed expenses and our variable expenses, and how to juggle those. And of course, the more money we spend, the less there is available for other activities, like the third money decision, which is saving and investing.
[00:01:47.680] We need to make decisions over how much of today's income we're going to set aside for the future.How much to have in emergency funds? Where to invest the difference? What type of contribution to make to retirement plans or 401(k)s? How to be effectively saving or investing for college? What types of investments to use? All of these are in the third category of money decisions over saving and investing.
[00:02:12.220] The fourth money decision is over borrowing. Do we pay cash for the new car? Do we finance it? What type of loan term do we get for a house? A 30-year mortgage? A 15-year mortgage? Do we finance business activities, or pay cash as well?
[00:02:29.790] Borrowing money can be a very effective strategy if it's properly managed, but when we're borrowing money, we're effectively taking future income to use today. And so you want to be really strategic over how money is borrowed, because it will definitely impact what's available for spending or saving.
[00:02:48.690] The fifth money decision is around giving, and there's two kinds of giving. There's involuntary giving, like to the IRS, and then there's voluntary giving, which can occur to a church, or charity, or family. We want to know how to minimize the one and maximize the other. But that's an area of significant strategy for a lot of wealthy families.
[00:03:09.510] And the final, sixth money decision is over protecting money.
[00:03:14.600] We have to make choices over how we're going to protect the assets and the resources we have, using things like life insurance, disability insurance, health insurance, malpractice insurance, all of these are ways that we protect our earnings, or our resources. And then there are also legal strategies around estate planning, and LLCs, and business structure.
[00:03:35.900] And so, understanding how the impact of insurance or legal planning will touch on the other areas is a really important intersection as you develop a financial plan.
[00:03:47.130] So, earn, spend, save, protect, borrow, and give. Those are the 6 money decisions that we all deal with every day, and hopefully, now you are wiser about how they impact your financial plan.
[00:04:00.810] If you have any questions, don't hesitate to reach out, and I'll see you back here next time.
/Logo%20Horizontal%20(4).png?width=2000&name=Logo%20Horizontal%20(4).png)
