The following is a transcript of a telephone conversation with Sandra Simmons, President of Money Management Solutions and creator of the Money Management Solutions software system…

Sandra Simmons, President Money Management Solutions

Sandra: Hi [name withheld] how can I help you?

Business Owner: Your business money management software doesn’t work for my business.

Sandra: What do you mean exactly when you say it doesn’t work for your business?

Business Owner: Well, for one thing, what good is going to all the trouble to fill out the budget? I already know how much money I’m spending.

Sandra: The budget module isn’t meant to tell you how much you’re spending. It’s designed to tell you how much you should be making.

Business Owner: What?

Sandra: And just making break even isn’t good enough, you have to budget to do better than break even.

Business Owner: Huh?

Sandra: Have you built your budget in the Money Management Solutions software?

Business Owner: Yeah.

Sandra: Okay good. How much did you budget for your Emergency Fund?

Business Owner: My what?

Sandra: Your Emergency Fund.

Business Owner: What’s that for?
(more…)

I find I cannot withhold my comments any longer on this topic of budgeting software. I see too many articles that pretend to be about budgeting software when the author knows nothing about what the word budget actually means. I don’t like it when incorrect information is served up to the public.

Here are some examples of what I find offensive:

A recent article posted on the internet states that “Budgeting software is a computer program that creates a profit or loss plan from data entered into the software. Some of the data to be entered may include earnings and expenditures.” Sorry, but that is NOT budgeting software, that is accounting software.

The correct definition of the word BUDGET is: the amount of money it takes for the organization or household to function, and to attain its goals.

Here’s the good news: living on a budget does not mean you have to cut back on the quality of the things you buy or deny yourself anything fun. What it does mean, is that you have to figure out how to make enough money to afford the things you want, now and in the future, and to keep your spending within the limits of your income.

Therefore, a correct budget is partially a computation of what you have spent in the past and partially a calculation of how much money you will need for specific items in the future to achieve your financial goals. Budgeting is a useless activity unless you use it to do income planning and spending planning. Accounting software does not do that for you. It only records what happened in the past and cannot help you predict the future or plan future actions.

That same article states, “There are many different types of budgeting software…” I challenge the author of that article to name three or four budgeting software products on the market that are not, in fact, accounting software. I can name one; Money Management Solutions, and it is NOT accounting software, it is what its name implies, money management software.

And yet another useless statement pretending to be good information is this one from that article, “Any sort of budgeting software can be used to keep track of a personal budget…” Well, it is a useless activity to keep track of a budget, unless you add the useful steps of using the information to plan your financial future and manage your money in a way that guarantees you will achieve your financial goals. Just keeping track of what you spent is a waste of time, unless you use it as part of the whole money management equation of planning the steps to take to reach those goals.

And finally this statement which has nothing to do with budgeting software, and everything to do with accounting software, and so becomes a misrepresentation of the facts to the reader, “Money management software is some of the most comprehensive software on the market today. Products such as Quicken and Microsoft Money will keep track of individual account information with various types of accounts such as checking, savings, and investments. These programs can also track credit card spending and alert you when you have overspent on your monthly budget.”

In fact, Money Management Software is PLANNING software which is used to plan and execute the actions you can take to reach your financial goals. Therefore, you won’t need an alert that you overspent your budget; you’ll know BEFORE you are going to overspend and make the necessary adjustments so that doesn’t happen. Accounting software, like Quicken and Microsoft Money, is RECORDING software and can only tell you what happened in the past.

Making financial decisions for the future based only on what happened with your money in the past is a dangerous activity. For example, if you read an article in Money Magazine that is raving about some stock that had double digit increases over the past 5 years, and you bought that investment based only on the record of past performance, you could lose your money the next day.

What should you do BEFORE you make that investment decision? You should do your own research into the stock and make an investment decision based on YOUR belief that the future plans of that company will continue to deliver double digit increases.

Bottom line, don’t believe everything you read about budgeting software that is really accounting software. Accounting software serves its purpose to record what happened so we can file our tax returns. I use it myself. If we ever get the FairTax passed and we don’t have to file tax returns any more, I’ll still use my Money Management Software because it is my planning tool to make sure I stay on the road to achieving Financial Freedom.

While the media is spinning story after story about the Presidential Campaigns, and Obama and McCain are chanting “Change, Change, Change,” I am asking “How, How, How are you going to do that?”

First, and most obvious, there is no power vested in the power of the President to enact law. That power is fully invested in the power of the Congress according to our Constitution. Let me repeat that. The Constitution does not empower the President to make law.

Executive Orders issued by the President that bind the entire nation are illicit because, as noted above, “All legislative powers” are possessed by Congress. An Executive Order that binds only the employees of the federal government (such as granting a holiday) is proper because the President should be considered to be the holder of power much like that possessed by the CEO of a company. But the entire nation is not in the employ of the President.

What power does the elected President have? The President does have a role in lawmaking with his possession of a veto. He can veto a measure approved by Congress (which can be overturned by a two-thirds vote in each house of Congress), or simply allow it to become law by doing nothing within 10 days, “Sundays excepted.”

Both candidates are saying they are going to cut income taxes, balance the budget deficit, straighten out the US economy, stop the wasteful spending, rehabilitate the Social Security system or provide affordable healthcare and health insurance to every citizen but, what they aren’t telling us is how they are going to get Congress to do that.

Second, it is an obvious mistake to think that cutting taxes will fix the government’s economy and allow the budget deficit to get handled. Any ordinary individual knows that in order to pay off debt, more income is needed. If enough income were made in the first place, of course, there would be no need to take on debt. Debt is simply a function of spending money you don’t have.

Since the government produces no income of their own and they just take it from us taxpayers, then if they take less income from us, they will have to borrow more money to fund all of their projects and that means a BIGGER budget deficit.

Smart money management requires working both ends; consistently raising gross income while cutting unnecessary spending to live within your budget. In all the years I have been around, I have never seen the US government demonstrate their ability to do this simple money management survival action.

What is the price of attaining financial freedom? It really is very simple. Make a ton of money, spend less than you make, don’t contract for any debt you cannot immediately pay with cash, and set money aside for the future survival of the organization.

Wednesday, September 17th, is Constitution Day – a day specifically designated by an act of Congress when Americans are supposed to honor the remarkable document that created our system of government. The date was chosen because the Constitution was approved at the original Constitutional Convention on September 17, 1787. How well do you know your Constitution? How well do Mr. Obama and Mr. McCain know our Constitution? Perhaps we should ask them about this by insisting they tell us HOW they intend to make all of these new changes which require new laws be passed.

If these actions weren’t so downright dangerous, they might be humorous. Are you making these mistakes with your hard-earned cash?

1. They never figure out how much money they actually need each week to do better than just pay their bills. They don’t have a budget set up.

The correct definition of a BUDGET is: the calculation of the amount of money needed for an area [organization or household] to function and achieve its purpose. If you are satisfied to just  pay your bills, and you don’t pay yourself first into some type of savings plan, you will make other people wealthy and you will stay poor.

Every supplier you pay is in business to make a profit. You should run your business and your household the same way: like a business that is expected to make a profit. The income target must include a profit or the enterprise will go broke and fail.

2. They don’t work out ways to make more money than they currently need, and then do whatever it takes to execute the plan.

By UNDER estimating the amount of money needed to do better than just break even, they typically set their income target too low and lose money by living on credit instead of going into action to raise their income. Anyone can find ways to make more money; it is often the “willingness to do whatever it takes” that is the problem.

There are two classes of wealthy people. The large majority of wealthy people are working all the time. They have a purpose they are pursuing, and it isn’t money. Money is a sub-product they expect from their work. Their goals and purposes are the driving force in their lives.

The small minority is often called the “Idle Rich” and they are bored to death. They have seen it all, and done it all twice over and there is no thrill left in life. Think about it. If you had done everything you dreamed of and owned everything you could possible want, and were spending your days sitting by the pool in some swank hotel nursing a beverage with a little umbrella in it, would you wish you had some productive work to do? I’d bet my next few paychecks you would.

3. They habitually spend more money than they make.

Using money to buy the “appearance” of having more money than you actually have is a dangerous activity. I call this type of spender a Gratification Groupie. This can catch up with you quickly and eventually drown you in debt. This causes constant worry about money and makes for lots of sleepless nights. Money truly cannot buy happiness. But doing something productive and worthwhile and knowing you are appreciated for it can make you feel like a million bucks.

Most truly wealthy people are not interested in appearing to be wealthy, they are too busy having fun helping others in life and making more money as a result of that. Rich people always pay themselves first, have cash stashed in several places, are always interested in being productive and expect their productivity to produce more income. They don’t worry about money, and they sleep well at night.

4. They don’t figure out what they need to buy in the future and then set aside a little money each week so they can pay cash for the purchase later.

Buying something with a credit card that you can’t pay off when the statement arrives is committing your future earnings to the credit card company. You are then working for the credit card company as an economic slave.

The correct way to buy things, especially big ticket items, is to set aside a little each week till you have the cash to pay for the item, and then go out and negotiate a big cash discount. The guy with the CASH IS KING!

I recently did this when I bought my current car. I found the exact car I wanted. It was 2 years old, had 21,000 miles on it and was still under warranty. The dealer wanted $29,500 for the car. I got it for $17,500 and got an extended warranty thrown in on the deal. Don’t buy new cars. The second the front tires move off the dealer’s lot onto the street, it becomes a “used car” and loses about 25% of its value.

5. They buy products and services based on WANT rather than on NEED.

Buying decisions should be based on how your purchase of the product or service can help you produce additional income for you. Honestly, do you want the latest cell phone that offers text messaging and email retrieval because your friends have one, or do you need it to be more efficient because you are out of the office traveling to close the next business deal?

6. They don’t put money into a long-term savings plan so they have it for use later in life.

If you are relying on other peoples’ future production to pay you Social Security payments so you can retire, that is really taking a gamble.

Despite the fact the government says the cost of living is going up 3 – 3.5% a year, the truth is that it is going up 8 – 12% a year. You have to make that much more income just to stay even. Why does the government say it is only 3 – 3.5%? Unfortunately for the senior citizens, it’s because they government has to raise Social Security payments each year by the cost of living increase they quote. The Social Security system is already bankrupt and those living on Social Security are headed in that direction by going in the hole 5 – 9% every year. Are YOU planning on retiring on Social Security payments alone?

7. They never develop multiple sources of income. If one source dries up they are in trouble financially.

The old saying “don’t put all your eggs into one basket” holds true today, especially for income sources. Look for products or services that you can add, or business ventures you can get involved in that are ethical, and have a great chance of producing a consistent income. The best type of income is “residual income” where you create something that continues to generate income for you while you are off doing other things.  For example if you wrote a book and sold it on the internet as a download where potential customers could buy it 24 hours a day around the world.

8. They get stressed out about how little interest their bank pays on savings accounts while they are getting killed with much higher interest debt by carrying balances on their credit cards.

If you have substantial credit debt, you are better off using excess cash to reduce the debt and stop the high interest payments instead of trying to earn interest from the bank. As you pay off your debt, you should also keep enough cash on hand to cover a few months of living expenses and the unexpected emergency.

Once the debt is gone, or will be soon, then start investing the excess money where you can get real growth. I use a Certified Financial Planner to invest my money for me so I don’t have to do all the research and trading actions. I let the expert do what he does best while I am busy making more income.

Now don’t get me wrong, I think investing in real estate is great if it provides more cash flow in than what you have to pay out. The truth is that any real estate is a liability as long as you have to make payments on it. Only when it is paid off does it become a true asset.

9. They worry about “the economy” in general.

I’m amazed that people are actually more worried about “the economy” than they are about their business or household failing financially. They worry about what the media is reporting about “the economy” which is something they can’t control, while never looking at how they are can affect the economy of their own business or household, which is something they CAN control.

A rise in unemployment is no reason to worry. Small business creation of new jobs far outweighed the loss of jobs in big corporations, according to the latest ADP report. A failing bank is no reason to panic. Banks get bailouts from the FDIC and other investors. No one is standing by to bail out your failing business or household. That is entirely up to you. So stash some cash in a safe, in a bank, or better yet, a tax deferred retirement plan, and sleep well at night while the bad news about “the economy” rages around you.

10. They expect to survive financially without taking full responsibility for controlling their financial future.

There is a very simple solution to money problems. Cut expenses, increase your income, and correctly manage what income you do get. It’s not only about how much money you make, it’s what you do with your money that determines your financial condition.

Correct money management is something educational institutions don’t teach. People get false information and bad advice about how to handle money. Then they make these silly mistakes, get into trouble, try to solve the problem using credit, create more trouble, and then go looking for debt relief.

Fortunately there is a proven, inexpensive, easy-to-install, easy-to-learn, easy-to-use money management software system that can reverse all the money management mistakes a person has made in the past, and keeps them from making those same mistakes in the future. It is an old-school system that your great grandparents used before the days of credit cards. Very wealthy people know and use this system today.

Sandra Simmons, President of Money Management Solutions, Inc. specializes in helping business owners and individuals manage their money to achieve financial freedom. For more information about her system, claim your complimentary copy of the Debt Reduction Solutions Guide.

© 2008 Sandra S. Simmons. All Rights Reserved.