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There was a time when most college students had to ration their pocket-money carefully to have enough for an ice cream soda or a movie on the weekend. When I was in college, I had a bottle where I dropped pennies every day, and once or twice a year I’d have enough for a dinner at a nice restaurant. Today’s students are bombarded with offers for credit cards as soon as they arrive on campus. Many are saddled with burdensome credit card debt at ridiculous interest rates in addition to their student loans. Before these kids figure out what credit is for, they’ve ruined it.

Business people know that anyone can run a company without profit, but no one can run a company without cash. The same applies to life. We’ve all heard the cliché “Cash is king.” I actually believe and teach that “Cash is prince,” because “Cash flow is king.”

Many young people fail to manage their cash flow properly and run out of money before the next paycheck, unable to meet their financial obligations. They miss credit card payments, car loan payments, or, worse, student loan payments. Soon threatening letters and phone calls begin, and inevitably collection notices and derogatory statements on their credit report weigh down their credit score. In some cases, young adults before the age of 30 file for personal bankruptcy and then spend a good part of their lives rehabilitating their credit. More important, prospective employers, landlords, and other credit issuers routinely check the credit score before offering employment or approving an apartment lease.

Here is the problem most young kids run into. An amount of money goes to their bank account every week or every two weeks. They pay whatever bills are due at the time, and see a significant surplus remaining in the account. Most treat it as extra spending money and do exactly that. They spend it. This is the ultimate in a false sense of security, because while they think that the “surplus” is spending money, it is actually money that must be used to pay bills that come due later in the month. Inevitably, when that time comes they are short of cash.

money-jars-how-to-teach-kids-about-money-250x250 To prevent this from happening to my daughter, I taught her the following simple principles for managing her cash flow.

1. Create a realistic budget and stick to it.

2. Set up multiple bank accounts with online access and link them together.

3. Pay yourself weekly or biweekly. Wherever your money comes from, your employer, your parents or a school loan, deposit your check in one of the online bank accounts; let’s call it the master bank account.

4. Transfer 10% of your income from the master to a savings account.

5. Transfer the money intended to pay bills to a bill-paying account. Immediately transfer the equivalent of two weeks of expenses to this account.

For example, your rent is most probably due on the first of each month. If you are paid biweekly, transfer half the rent from the master account to the bill-paying account, and do the same with all your bills such as utilities, food, credit card payments, etc. If you are paid weekly, transfer a quarter of your monthly expenses to that account.

6. Pay all your bills by credit card whenever possible. Doing so causes you to write fewer checks and makes record-keeping simple and centralized.

7. Pay all your bills online. Program your accounts to automatically issue payments two days before the bills are due. This helps you in two very important ways:

a. Your bills are always paid on time, and that is the most important ingredient for a good credit score.

b. You avoid making the cardinal mistake of overspending and running short or “bouncing” a check.

Consider this all too familiar example: You have paid your bills with physical (paper) checks and mailed them to the intended payees on time and you feel good about it. The next day you check your account balance and discover that you have more money than you anticipated. To reward yourself, you decide to spend it on things you enjoy. A few days later the bank calls you with an “insufficient funds” message.

How could this happen? Here is how. When you pay by paper check, the money stays in your account until the check clears the bank, which, counting transit time and other factors, could take from a few days to a few weeks. Online bill payment removes the money from your account on the same day the check is issued, thus eliminating any unpleasant surprises. It is fast, secure, and automatic. It also saves you money because while many banks charge you for writing checks, most banks offer online bill payment for free.

8. Pay your credit card bills weekly. Programming your account to pay a quarter of your credit card bill each week reduces the finance charges assessed by the banks if you carry over balances from month to month. More important, you eliminate any risk of a late payment, and your credit score rises.

9. After you have followed steps 3 through 5, you should still have the money you budgeted for entertainment and the like.

10. Withdraw the full amount in cash. Use only cash for drinks with friends, dinners out, movies, etc. This is your safety valve. You can order only as many drinks as you have cash to pay for.

Keep the credit card in your wallet and you will have no unpleasant surprises.

While saving money is important, establishing good credit is even more important. When my daughter was in high school, I got a joint credit card, which she shared with me. Initially I maintained control, and later supervised how she used it. As you might expect, she made some mistakes. When mismanagement or overspending was evident, I’d e-mail her a copy of the statement and ask her to justify specific expenses. Those were not happy days for her, but they provided a forum for accountability, discussion and education.

Knowingly or not, the entire time she was learning to control her spending, manage her cash flow, and establish some savings. Most important, she was also establishing credit. Persephone secured a full-time job before graduation, and a month later she asked to be cut off from any support on my part so that she could make herself financially independent. Soon thereafter, she was approved for an apartment lease within a day, and was told the expedited approval was due to her credit score. A few weeks later, she was able to get a very nice car for herself entirely on her own creditworthiness. The following month she joined the ranks of American Express cardholders. Watching my daughter’s ability to do these things as a young lady let me know that she was well on her way to independence.

This is my opinion.  It worked for me and it can work for you.  You just have to try it!

Leadership is a concept, not a person.  It becomes a physical entity when one chooses to embody the characteristics of leadership in the way they influence, motivate, teach and train organizations to emulate their own example.  “We all know that leadership —  whether you are the CEO, or the manager, or the mom — is about the ability to influence the thoughts, emotions, and actions of other human beings” wrote Tony Robbins in a recent blog post.

Leaders are not born, they are made.  Whether you are creating a leader at work or at home, no leadership ingredient is more important than mentoring.

Mentorship is an ancient art. In earlier generations, young apprentices would be mentored by skilled craftsmen to learn a trade. They arrived eager to learn and left with the skills, expertise and experience to make a living. This art continues today in many trades and professions – including medicine.

A mentor’s job isn’t to boss people around, to tell them what to do or how to do it; it is to pass on knowledge, skills and experience, and guide his mentees to their desired outcome. Put another way, a mentor doesn’t dictate how to get to the destination, but instead helps to read the map and delineates the waypoints along the charted course. The mentor knows the terrain and is a good guide in times of uncertainty.

Mentoring works at the office and it works at home. This is the way in which I developed each of the key members of my team in the past 20 years, and more importantly, this is how I parented my daughter as a single dad since the age of seven. “Personal strengths and interpersonal skills that are essential to exercising effective leadership also apply to being an effective parent,” said Dennis E. Coates, PhD, a teenage brain development expert.

P_learning to read 1990In fact, my experience in building and growing a business, as well as leading and mentoring my team at work served as the blue print for parenting my beautiful daughter as a single dad.  Now at 25, a loving, emotionally healthy, responsible, un-entitled, thriving adult, she‘s become a contributing author to CDO Chief Daddy Officer: The Business of Fatherhood, a book I recently published explaining the seamless transfer of business skills to personal relationships and parenting.

Those in my dad’s generation approached parenting like a dictatorship: “What I say goes”. It is certainly true that any organization needs authority and structure, and a family is no exception. I discovered, however, that authority at work or at home does not need to be expressed in a dictatorial fashion.

If we keep our goals in mind – raising emotionally healthy, responsible, un-entitled, functional adults – we see that the best approach to parenting is hands-on, deeply involved mentorship. Children are like sponges, ready to absorb everything we say and do. Our goal is for them to absorb the information and skills needed to care for themselves and make the world a better place.  We ultimately want to guide our children on their journey, not travel it for them. In the end, the parenting process is about guiding and supporting our children on the journey from dependence to independence.

In business we must cope with the reality of limited resources and prioritize what gets our time, attention and funds. As mentors to our children, we need to decide which values and skills are most important to us. If we want our children to be respectful and polite, we need to begin to monitor those behaviors early in their development. The same goes for being hardworking, responsible and kind.

As you begin mentoring your children, here are a few things to consider.

  • Give thought to situations you want to expose them to, that will help develop compassion and empathy.
  • Ask meaningful questions that draw out thoughts, concerns and ideas, instead of asking trivial questions that go nowhere, such as “How was your day?”
  • Teach them about money management so they know how to handle finances and stay out of debt.
  • Make time to be there physically and emotionally so they know they can count on you.
  • Offer encouragement and praise when their behavior is consistent with your plan.

As we set our priorities, we must keep in mind how children learn. They learn by watching us, not just listening to us. The way you act and react is how your child will learn to behave. So lead and mentor by example and explanation both at work and at home and I promise you will meet with success on both fronts.

This is my opinion.  It worked for me and it can work for you.  You just have to try it


Published in Leadership
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