aking charge of your finance is not about spending your entire life accumulating money. It goes far beyond that. Real wealth is really not possible until you have ensured alignment in vital areas of your life. I read sometime ago about some individuals in the United States of America who spent all their lives making money. They, indeed, made quite some tonnes of money. The sad thing, however, was that most of them ended up committing suicide. After all the money, they discovered that they were still not fulfilled. There were still many vacuums money could not fill in their lives.

While I would focus my discussion in this column on financial matters, I am recommending the suggestion of one of my mentors, which is also well articulated in Stephen Covey‘s Seven Habits of Highly Effective People that you should go out of your way to shape up in these areas: spiritual (the principal thing), relationship, career, health, community service and personal development.

Let us look at the spiritual aspect for instance. You really cannot go farther in your quest for financial freedom than your level of spiritual development. Real success comes when your level of development outside matches your level of development within. If there is ever going to be an imbalance, it should be in favour of spiritual development.

On health, an Irish friend once told me something when he was in Nigeria that I have ingrained in my consciousness. Most of the time when he visited Nigeria, he would get out of the hotel latest by 6. 30a.m. to jog for a distance of about six kilometres non-stop. He would not take anything fried or with sugar. He was not a vegetarian but he ate more of vegetable and fruits than those things we regard as enjoyment here. One day I asked him why he was subjecting himself to such punishment. His response: ”I don‘t want to become a wealthy man in the grave.” I found that profound. What does it profit you to accumulate great wealth and you don‘t have a good health to enjoy the wealth. The message is that while you are busy making money, remember to take good care of your health. It is a sign of wisdom.

Relationship counts. You should try to widen your circle of friends all the time. Deliberately look out to network with people who can assist you make your dream a reality. A motivational speaker once said that there are two types of individuals you would come across on your way to fulfilling your purpose. There are those he calls dream breakers and there are those he calls dream makers. The wisdom is in identifying dream makers and connecting with them while you break off without delay with anybody you suspect can sabotage your dream.

On career, the earlier you come to terms with the reality that nobody is really interested in charting a career path for you, the better you would become in life. You are 100 per cent responsible. You must take time to figure what you want to do in life, the skills you need to develop to get you there and people you need to connect with to make the journey shorter. If along the line your employer shows interest in helping you to contribute to your career development count this only as bonus. Always remember that you are in charge.

Again, do not concentrate on your own needs alone. Actually the first sign of spiritual maturity comes at that time when you think more of what you can do for others without necessarily expecting a reward. Get involved in community services.

I believe very strongly that if you make efforts at working on all those areas listed while you are working on your financial freedom, you are likely to end up on the right end of life. Money can serve as a good lubricant to life, but it is not everything. A life of balance is better. Of course, I am assuming that you know achieving mastery in each of those areas should be a life-long thing. he new year is a time for goals and resolutions. If one of your goals in 2008 is to take control of your money (instead of letting it keep control of you), this crash course in financial basics can help guide the way. Here’s a summary of everything I’ve learned about personal finance.

Track every penny you spend
The authors of Your Money or Your Life admonish readers to “keep track of every cent that comes into or goes out of your life.”

[This is] the best way to become conscious of how money actually comes and goes in your life as opposed to how you think it comes and goes…This is the step that somehow makes the biggest impact.

It doesn’t matter how you track your spending — the most important thing is to do it. You can use a cash notebook, you can use an on-line tool like Wesabe, or you can use a piece of software like Quicken or Microsoft Money.

Whichever method you choose, stick with it. Make it a habit. Don’t fudge the numbers. Record your transactions as soon as possible. Most of all, don’t judge yourself. Tracking your spending is an exercise in data collection; it’s not the appropriate time to change your habits.

Develop a budget
After you’ve tracked your spending for a few weeks (or months), use the data you’ve collected to develop a budget. According to The Millionaire Next Door, budgeting is one thing that sets the wealthy apart from the rest of us — 55% of millionaires keep a budget.

Many people — including myself — fail to budget for a variety of reasons: it’s boring, we don’t think we need it, we don’t know how. But this simple act provides a roadmap for your money. There are a variety of budgeting methods you can choose, from Andrew Tobias’ three-step budget to the 60% budget. Last October, I wrote about the spending plan, a budgeting method for non-budgeters.

This year, I intend to give PearBudget a spin.

Start an emergency fund
For years I lived paycheck-to-paycheck. I spent everything I earned. This worked well until something went wrong. And something always went wrong. Suddenly I’d find myself without money to pay for a car repair, or facing an expensive doctor’s bill. I financed emergencies with credit cards. After years of carrying debt, I finally paid off all these emergencies last month.

In The Total Money Makeover, Dave Ramsey explains why he believes an emergency fund should come before anything else:

Since I hate debt so much, people often ask why we don’t start with the debt. I used to do that when I first started teaching and counseling, but I discovered that people would stop their whole Total Money Makeover because of an emergency — they felt guilty that they had to stop debt-reducing to survive.

After you’ve saved $1000, then you can attack your debt. Open an online high-yield savings account and add $20 or $50 to your account ever time you get paid. Last summer, I opened an account at ING Direct, where it’s simple to schedule automatic deposits.
Get out of debt
Are you struggling under a heavy debt load from credit cards or student loans? Make it a priority to unload some of this this burden in 2008. Last month I said good-bye to 20 years of debt — it feels fantastic to have that weight off my shoulders.

If you have the mental discipline, you’ll save money by paying down your high-interest debt first. But if you’ve tried that method before and failed, consider using a debt snowball. Pay your debts starting with the smallest balance first. Here’s how:

1. Order your debts from lowest balance to highest balance.
2. Designate a certain amount of money to pay toward debts each month.
3. Pay the minimum payment on all debts except the one with the lowest balance.
4. Throw every other penny at the debt with the lowest balance.
5. When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-lowest balance.

The debt snowball can give you awesome psychological payoffs, keeping you motivated to stay in the game. It’s not mathematically ideal, but it worked for me (and for many others besides).

Open a retirement account
If you’re young, you probably don’t think you need to start a retirement account. You’re wrong. No matter how old you are, now is the time to begin saving for retirement. Compound returns favor the young, and in a big way! (Here’s an illustration of the cost of waiting one year.) In The Automatic Millionaire, David Bach writes:

The single biggest investment mistake you can make [is] not using your [retirement] plan and not maxing it out.

After reading The Automatic Millionaire a couple years ago, I opened a Roth IRA at Sharebuilder. It was easier than opening a checking account. I managed to make the maximum contribution in 2006, and tomorrow I’ll complete funding for 2007. Don’t understand retirement accounts? No problem. Last June I explained what a Roth IRA is and why you should care.

Spend less than you earn
This is the fundamental money skill. It’s common sense, yet many people never learn do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending or develop a budget, but those steps aren’t completely necessary. Even if you do nothing else in this list, spending less than you earn can put you ahead of your peers.
Automate your finances
My current project is to move toward a system of paperless personal finance. Along the way, I’m learning the value of automating routine transactions. When you make things automatic, you remove the human element, making it more difficult for you to mess things up.

The classic example is overdraft protection. By tying your checking account to your savings account, you have a safety net if you bounce a check. But there are other ways this can work for you. For example, I’ve set up automatic payments with the gas company, the cable company, and my auto insurance company. I also make automatic investments to my retirement account.

Educate yourself
Knowledge is power. Personal finance doesn’t have to be a mystery. Subscribe to this site. Visit other personal finance blogs. I recommend:

* The Simple Dollar
* I Will Teach You to Be Rich
* The members of the Money Blog Network
* The members of the LifeRemix Network

Last spring, I shared a vast collection of online financial literacy resources, including video tutorials, web-based courses, and much more. This is a great place to begin learning about the basics of saving and investing.

Finally, read personal finance books and self-development manuals. These are four of my favorites from the past year:

* If you’re in debt and can’t seem to find a way out: Debt is Slavery (and 9 Other Things I Wish My Dad Had Taught Me About Money)
* If you’d like to know more about investing: The Random Walk Guide to Investing
* If you always seem to do the wrong thing with money: Why Smart People Make Big Money Mistakes (and How to Correct Them)
* If things are tight and you need to find creative ways to make ends meet: The Complete Tightwad Gazette

You don’t have to agree with everything in a book to get something out of it. I read a lot of personal finance books — some are good, but many are not. Even the worst books usually have one or two things I can pull from them. Learn how to read a personal finance book so that you can pick and choose those pieces appropriate for your life. And remember to use your public library!

Final words
Taking control of your finances can be intimidating — there’s so much to do! — but it doesn’t have to be that way. One effective solution is to take a vacation day from work: designate one specific date as your personal “Money Day”. Use this day to finally set up Quicken on your computer, to open a retirement account, and to call around for a better deal on your insurance.

Two final notes:

* Do what works for you. There are few hard-and-fast rules in the world of personal finance. I can suggest methods that have worked for me (and for others), but only you can determine if these methods are appropriate for your own circumstances.
* The perfect is the enemy of the good. When you spend so much time looking for the “best” choice that you never actually do anything, you are sabotaging yourself.

The good news is that you can get out of debt. You can save for retirment. If I can do it, so can you. Best wishes for a prosperous new year!