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The modern approach to wealth, success, and self-fulfillment.
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Manage Your Finances Like a Country               

When you look at the more successful, sustaining countries in the world, you can notice similarities between them.  Whether the country is small or a world superpower, these countries tend to have the same measures in place that have contributed to their longevity, perseverance, and world dominance.

I think people should approach their finances like world leaders manage their countries.  With this publication, I am going to point out how individuals can find great financial success by managing their finances like world governments manage their countries.

Have a Financial Constitution

Countries establish rules because rules create order.  Construct order around your finances by creating finance-based rules for you to follow.  For example, a rule could be if credit card debt limit reaches 20 percent of total credit limit then all spending must cease except for emergency debt, and then establish a rule for what constitutes “emergency debt.”

Building in basic rules will help you to develop good money habits.  Financial rules communicate what your fiscal mindset is.  Furthermore, if you are married or jointly own finances with others, having financial rules will create uniformity as it pertains to finances and also set the foundation for consensus as to how finances will be governed.

Establish Separation of Powers

The United States established three branches of government - executive, legislative, and judicial - to divide the power of the government and provide a means of checks and balances within the government process.  The duties are separated between each branch to ensure a democratic process prevails for the people.

If you jointly control finances then you should establish a separation of powers.  Separation of powers will ensure that objectivity can be taken into account when it comes to your finances.  For example, one person should have authority over the joint finances while another person overseas household operations.  One person is an expert in the household operations and the other on the debt and income of the individuals.  The finance person would need to obtain approval from the household manager for home-related items, and vice versa.

Separation of powers add in an additional layer of independent verification and validation - or about as much as you can get being as though you both have a stake in the finances and the home - and will force individuals to compromise on financial and household concerns.

Implement Taxation

Countries use taxation to generate revenue for the nation.  People can use taxation as a means of generating revenue for themselves in the form of savings.  Determine how much of your revenue (income) you are going to tax and divert that into your savings account, retirement account, or both.  Mandating a tax upon yourself ensures that you will build a cash reserve to sustain yourself in the future.

Establish Annual budgets

Annual budgets allow governments to track spending while funding programs that are necessary to keep the commonwealth going.  For example, a government will select to allocate funds to defense efforts, welfare programs, mitigate natural disasters, and so forth.

People can implement annual budgets as well.  On an annual basis, decide how much of your funds you can spend on specialty items such as holidays, entertainment, and possibly automobile maintenance.  This may require some estimation on your part.  For example, review how much it cost you in the previous year to maintain your car.  Take into consideration work that may need to be done that wasn’t managed before and allocate funds towards that.  I would recommend that people not get too granular with establishing an annual budget, meaning there is no need to budget everything such as meals and such.  Pick some items in your life that you’d like to get a better financial control over and manage those items on a budget.

Track Your Gross Domestic Product (GDP)

Countries like the United States heavily monitor their gross domestic product, or GDP.  Gross Domestic Product is the monetary value of all finished goods and services made within a country during a specific timeframe (usually per calendar year).  By tracking their GDP, a country can gauge their economic strength and also compare their economic output to other countries to determine how competitive they are on a global scale.  Countries can also use GDP measures to estimate the size of their economy and growth rate.

People can use this tactic to measure their own personal value in the context of how it relates on a micro level.  If you are strictly a career employee, then your talent within your professional field and the salary that accompanies it would be your GDP.  You could use various online recruitment and human resources websites to compare your GDP against others working in the same field to determine your overall economic strength.  This may help you to ask for an increase in wages or seek work somewhere else willing to pay what you think you are worth based upon the research you conduct. If you have an outside hustle in addition to being a career employee, calculate your earnings and project how much you will make on by year’s end.  Then, add each side hustle, investment, or business venture that you have so that you can determine your overall GDP.  Use online research tools to compare your net worth against the median net worth for your area, demographic group, or other variable that you choose to analyze your GDP against.  By tracking your economic growth, it will help push you to seek economic growth; thus, increasing your wealth.

Manage Your Foreign Relations

Foreign relations allows countries to develop relationships with other countries.  Not all countries will be allies, but the goal of foreign relations is to have a meeting of the minds so that two or more nations can coexist and respect each other’s boundaries and wishes.

Establishing foreign relations in your personal life will help you to build up your network of resources that you can use to collaborate on various projects.  In the workforce, we call this networking and it helps people advance in their careers or achieve business objectives.

If you follow PASS (see previous A. J. Smith 365 publications on PASS), I would recommend that you build a network of other PASS followers.  That way, you can trade goods and services amongst one another.  I am not an accounting professional so please check with a financial specialist or your local government, but trading personal resources with others can possibly help to avoid taxation.  For example, if you have a network of people who are self-sustainable and you know that Person A harvests walnuts, Person B raises goats, Person C has a tea farm, and Person D has a peach farm and makes peach preserves, you all could leverage your resources together and form a conglomerate of “nations” that trade amongst one another. 

Manage Trade Relationships

Financial solvency boils down to one simple formula: have more money coming in (assets) than you do going out (expenses).

Treat your money like a trade policy.  A major goal of U.S. President Trump’s first presidential term was to rework all of the trade agreements the United States had with other foreign countries - both allies and non-allies.  The president, as well as some foreign policy experts and businesspersons, felt as though the United States had trade agreements in place that put the United States at a disadvantage.  He felt as though the trade agreements with Europe, China, and the North American Free Trade Agreement (NAFTA [Canada and Mexico]) was the primary reason for America’s trade deficit.

Individuals should look at their finances in a similar way.  Look at with whom you give business to and analyze how they treat you as a customer.  If you have an agreement in place with a telecommunications provider, look at other plans and see if you can get a better rate.  Try to negotiate lower cable bills or negotiate a lower rate on a credit card account.  The goal is to maintain a trade surplus; meaning the value of your services (assets) exceed the cost of the goods you consume (expenses).

Have an Adequate Defense System

Every major country has a defense system in place.  The military presence ensures that they protect the system of government that they built, their resources, and their geographical boundaries and the citizens within it from being overrun by intruders.

Always prepare for the worse.  Unfortunately, this is not a perfect world and there are elements within it - both people and wildlife - that can be potential threats to your assets.  An adequate defense system could be as mild as security perimeter cameras, motion detection hardware, and erecting a barrier around your property.  Or, it could be as extreme as acquiring arms and learning how to use such weapons.  This publication isn’t intended on recommending any solutions as each person’s situation and preferences vary.  However, we do recommend having a defense system in place so that you can protect yourself and your possessions.

Prepare a Succession Plan

Since the great dynasties of Egypt, Kush, and Rome, kingdoms have always had a systematic process of choosing the next ruler.  Some were more straightforward (birthright) while others were more complex (democratic).  History has also shown us what can happen when there is an omission of a succession plan - a fight for the throne ensues and ultimately the citizens and the kingdom suffers.

Prepare for your incapacitation or demise by establishing a will, a trust, filing the appropriate beneficiary forms on applicable accounts, and having a power of attorney process in place.  You may be incognizant of what is occurring should you be incapitated, or worse, but at least you can do your heirs a favor and create a succession plan that helps to transition your assets to your loved ones and provide clarity as to how you wish your assets be handled.




 
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