No matter how much money you earn thereâ€™s always a limited quantity. If youâ€™re not careful to manage your finances successfully, you can easily blow through a few hundred, or even a few million, each month. Take Johnny Depp and his reported spending, for example. In a recent article from USA Today1, he made headlines for his nearly $2 million per month spending habits. It includes a $30,000 monthly bill for wine, $200,000 a month maintaining private planes, and staff and security costing a total of $450,000 per month2. He also bought a 150-foot yacht for $18 million, and maintains 14 homes and a chain of islands in the Bahamas.
While you may not be burning through a couple million each month, itâ€™s important to consider your financial habits no matter how much or how little money you have. With that in mind, here are three ways to manage your finances successfully.
1. Keep an eye on your cash
The key to a healthy money relationship is being proactive with your finances. To maintain a consistent level of control you must check your accounts often, balance income and expense reports, and have regular meetings with the financial professionals in your life. Even for a celebrity as well-known as Johnny Depp, ultimately heâ€™s the only person to blame for his financial woes.
2. Donâ€™t spend without limits
It may sound like age-old advice but â€œspending less than you earnâ€ has been sage wisdom for many decades because it works. Spending less money than you earn is the best way to build wealth for the long term. Spending without limits, on the other hand, will eventually catch up with youâ€”no matter how much money you have at your disposal.
3. Regularly review your spending habits
In order for corporations to succeed, they must perform regular audits of how the company functions as well as review the profit and loss breakdown. If they fail to do this, it could spell disaster for the future of the company.
Likewise, itâ€™s vital to regularly review your spending audits and locate areas where you can streamline. In the case of Johnny Depp, we know he spends millions of dollars each year to maintain his homes across the globe (including a 37 acre French chateau3). Since you can only live in one location at any given time, itâ€™s a good bet to say that he could offload some of these financial liabilities in order to streamline his expenses.
When it comes to managing millions of dollars, or only hundreds, the same rules apply to everyone. Be careful not to get too comfortable with your current financial situation. Money can be very unstable and your circumstances could change in an instant. Whether youâ€™re a famous movie star or just an everyday Joe, it pays to follow a sound financial plan.
Richard Feight is a Fee-Only Certified Financial Plannerâ„¢ and Professional NAPFA-Registered Financial Advisor at IAM-Financial. Rich has 20 years of experience offering low cost â€œFee-Onlyâ€ comprehensive financial planning and investment advice. For more information visit IAM-Financial.com.