Are you overwhelmed by your finances? You’re not alone. In this episode, Wade Reed introduces his revolutionary O.S.O.M. (“Awesome”) Method – Organize, Systemize, Optimize, and Maximize – designed to take control of your financial life. Wade dives into the core principles of personal finance, from practical money management strategies to the profound impact of purposeful spending and investment. Tune in to discover how to transform your relationship with money and achieve true financial freedom.
—
Watch the episode here
Listen to the podcast here
Episode Resources
Transcript
I want to get into each of those perhaps in individual episodes at least briefly. I want to give some context though to personal finance before we jump into the meaning and what goes into each of those four components of my O.S.O.M. method. Personal finance, what is personal finance? Finance is a term that we use that has to do with transacting. Finance is how you pay for things. We pay for things with our effort.
I want to talk about the core framework I use when coaching clients and helping them accomplish their financial goals very effectively with regard to money. Money is an object of the mind. It is something that’s constantly on our minds. We use it every day to transact and to get the things that we want. Very commonly, I run into people who are stressed out about money like, “I don’t know what I have. I wish I had more. I wish I could do more. I wish things were simpler. I hate managing money. I’m scared of it. I’m overwhelmed by it.”
Have you ever experienced something like that with regard to your personal financial life? I know I have at times. I’m certain you have. This is my life’s work. I’ve been at this for many years and I have dealt with it over and over. Perhaps, one of the reasons I do what I do is because I want to overcome it. I wanted to find a way to be a master of money. Thus, the name of the company, Money Mastery Coaching. My method has been built out of hundreds of clients and tens of thousands of hours. Probably had close to 20,000 hours of conversations at this point in my career regarding the topic of personal finance.
I’ve studied the gurus. I’ve been in the training, read the books, and practiced the methodologies myself. What I’ve come up with is a framework and a method I call O.S.O.M. I want you to be O.S.O.M. Money Masters. O.S.O.M. is an acronym. It stands for getting Organized. Having a System in place for money management. Optimizing your financial life, meaning you tweak it and improve it over time, and then Maximize your financial life. Again, Organize, Systemize, Optimize, and Maximize your financial life.
Personal Finance
We might go trade with somebody and say, “I’ve got this ability to do a certain thing. Maybe it’s accounting work, physical labor or a skill that you have that others need.” Rather than exchanging dollars. You simply exchanged your service for something in return. We had some landscaping done at our house. We had four or maybe five people working in our yard clearing out the messes in the yard and we exchanged with them in the form of dollars. I could have as easily said, “Come do this work and I’ll provide for you food.”
I could have given them food out of my pantry. I could have given them a ride somewhere. Maybe they could borrow my car. There are all kinds of ways we can trade and that’s known as barter. You might pay for something in the form of barter. That’s an old-school way. We used to do it all the time and we no longer do that, at least for the most part. We transact in different ways. Another way you can find out something is with cash, so physical bills.
You might pick up a $10 bill and you take that to the grocery store. You’re like, “I want to buy some steak, potatoes, some carrots and create a meal.” You do that with your $10 and you go pay for your food. It makes the speed of transactions very easy. At that same grocery store, don’t they accept other forms of payment? They probably won’t accept barter at that level of store because it’s not in their methodologies, but they would accept different forms.
You might do a debit card transaction and directly linked to your checking account at the bank. You might use a credit card and borrow money from a financial institution temporarily and have a 45-day window before you have a bill due. There are some conveniences to that. That’s debt financing. You might use a Venmo. Some places are allowing for that. Again, that’s an intermediary where it moves from your bank account to that temporary intermediary called Venmo or PayPal.
That is held at their bank for a couple of days. They temporarily finance it and then they give you a day or two then your transaction like slowly moves from your bank account to them. The payment’s taken place. Financing is how we transact. It’s the method with which you choose to make your payment. What about the personal side of it? That should be very obvious. Personal finance is about you. It’s your person. It’s what you do to create value. It’s what you do to earn an income.
Personal finance is about you. It’s your person. It’s what you do to create value. It’s what you do to earn an income.
There are about 5 or 6 key things that we do in the personal finance realm. One of those is earning income, and then we need to do something with that income. We need to store it somewhere. We typically call that savings. We need to use it in some way to get the goods and services we need to fulfill our lifestyle, our needs, and our wants. That’s spending.
In addition to that, generally, we have a desire to hold on to some of it for later use and growth for what we might call retirement. I’m not a huge believer in retiring because I believe that we are built to do things we love and to do work. It brings us joy, satisfaction, and progress. I don’t envision a formal retirement in my future. You might be in yours, but it might be a function of what you’ve learned over the years.
I invite you to think about retirement being that if you choose to retire. You’re retiring to something else that you care about purpose, passion, and belief. Maybe it’s generosity and volunteering. Maybe it’s consulting or a new venture in your life. You retire from something into something else. What I have found in those who retire from jobs that they typically have hated over the years is that they are all flat in life. They feel purposeless and sometimes will die early.
I have a couple of anecdotal stories from my peers whose parents have passed early because of the craving to retire. I’m going to work for 30 years and when I’m done, I’m going to retire and go do the things that I love. because they didn’t have a purpose, their health declined, and they ended up passing away. They don’t get to do the things they want to do in life. Retirement is a notion that can be harmful to us if we don’t have the right context. Retire to something rather than from it.
Retirement is a notion that can be harmful to us if we don’t have the right context. Retire to something rather than from it.
Thereby, one of the things we do with personal finance is set it aside and invest it. That’s number four. We earn, save, spend, and invest. What else do we do with it? There’s also this function of giving back that oftentimes people bring up. “I want to give back to society.” That can be of course involuntary, but also in the form of dollars we might give to charitable causes we believe in. It’s very common You have 10% of one’s income set aside for the purpose of giving and generosity.
That’s called a tithe, the tenth of our income that comes biblically from the Old Testament in the days of Melchizedek. He is the one who received tithes from Abraham. Abraham was a big proponent of giving. It was a law of the day in Malachi between the last book of the Old Testament. It talks about robbing God by not giving tithes and offerings. He will promise us a blessing greater than we can receive. In fact, he says, “We’ll open the windows of heaven to us if we will give of our tithes and offerings.”
There’s something powerful, whether you believe religiously or not, in that principle. It is a principle of success in life. Even those large organizations that have been around for a long period of time, their founders believed in the importance of giving back in some way. There are foundations that have been set up to provide educational resources, libraries, training programs, and scholarships. Giving back is an important part of our personal finance life.
Giving back is a really important part of our personal finance life.
I strongly encourage you to have that as part of your plan, your strategy for wealth creation. When we give, we invoke this law of reciprocity, which brings more back to us at some point in time. It may not be the next day or the next week. At some point in time, we get a remuneration of the dollars and effort that we give by having goodwill out there that people will be generous back to us. I have found that when I give generously, you can’t outgive God. Things always come back in greater abundance than what I’ve sent out. That’s another component.
We have this thing called tax. Personal finance is a big component. In fact, you might imagine a fence. Imagine this with me. You’ve got a top rung that supports the vertical slats of offense and the bottom rung that supports the vertical slats of offense. The top rung you might call simply the topic of personal finance. Vertically, these slats include what I’ve been describing to you, the earning of income, the saving, the spending, the investing, and the giving components.
The bottom rung is taxation. In fact, taxation is a part of everything we do. It’s one of the most frustrating and costly things that we deal with in personal finance taxation. If you’re watching this video, above my right shoulder, there’s a book called Tax-Free Wealth by a CPA and strategist called Tom Wheelwright. He’s been very good about helping us understand the financial system. If you read that book, it’s quite easy to understand.
It’s one of my favorite books when it comes to understanding how tax and taxation work and some of the benefits that can be achieved by having a small business through which you can run expenses. That gets a little more complex when we start to get into businesses. Many of you are business owners, it’s important that you understand that. In fact, all of us ought to take the time to read through our two-page tax form called the 1040.
If you read through the line items, there are a ton of clues. Simply reading through the line items, most of you have never done that, but I strongly encourage you to do that. Read through your tax return. Get familiar with it. Be familiar with the line items and why things were plugged in there and why they weren’t talked to your CPA or tax preparer about why the line items were filled in which ones were missed and what you can do to qualify for more deductions.
We need to be proactive about personal finance. That’s the core of what I wanted to get to. Personal finance has to be personal. We have to take it personally. We have to recognize that no one else will care more about our money than ourselves. “No fiduciary.” A financial advisor is called a fiduciary who’s supposed to only do things in your best interest. They’re still self-interested in their lives. They’re trying to make a living.
If they get the responsibility of many people’s financial investments and financial lives. They honestly just can’t. I’m a fiduciary as well. Although, I don’t have a license to be a formal fiduciary. I believe in the concept of doing right by clients and only doing what’s in their best interest. I do represent life insurance companies. I’ve been doing that since 2009. My licensing is in that realm.
I believe and I focus my personal finance practice, both in coaching and in the position of safety. I help clients build the foundation of their financial lives through life insurance products and annuity products that create certainty, which is a great complement to the risk that’s associated with businesses and real estate and investing in other things. You need to be careful with that stuff and take it personally.
We need to have a personal interest in how we’re creating an income, how we deliver value, how we solve problems, and how we engage with employers or customers or clients if you’re a business owner. Even if you’re an employee somewhere, you are a business owner. If you think of it in that context, I am a business owner with one client.
My one client is my employer and I want to be my best self, create the most value, and make others look good in the organization so I can progress up the corporate ladder if that’s the space you’re in. You want to become a greater leader and have more income. If you’re not in that space and you’re an owner of a company. You might have multiple clients, customers, or people that you serve. Thereby, you have more diversification of income sources because you have multiple people who pay you. Your organization then takes in that income. It pays salaries to you and your employees and contractors.
That’s what I’m talking about. Oftentimes with business, we’re very careful and deliberate about how we handle those things. If you look at any large business, there are balance sheets, financial statements, and accountants who manage things, and oversee budgets and planning so that the resources are used wisely. The business can sustain itself and it can be there for many years and ideally, generations. Some of the large banks and finance institutions and corporations like GM. These companies have been around because they’ve been very well managed.
That’s a big deal. If we follow the principles of what businesses do and our personal financial lives. We’ll be careful. We’ll have a personal financial statement of some kind that measures our income and our expenses and whether we’re profitable or not. We’ll have a balance sheet that measures the progress we’re making with the things that we own, versus the things that we owe. The equity that we have that we’re building up in our life.
Organize Your Personal Finances: The Foundation for Financial Success
Those things are measuring sticks that help us know how we’re doing. If we take personal finance personally, we’ll be measuring how we’re doing. We’ll take some time. It doesn’t require a lot of time. That’s where the system that I have for my clients comes into play. First, we get organized. We gather our financial data. We look at our mindset. We look at how we’ve come to believe things about money and our day-to-day behavior about it. Whether we’re proactive or reactive, all the time or none of the time. Whether we’re scared about money or excited about it, or a miser or we’re a saver. Some people call it a money monk. There are these different personalities about money.
Oftentimes in a marriage, there’s one who’s more aggressive, risk-oriented, and spending-oriented. One who’s more safety-oriented and accounting-oriented. That’s okay. It’s important to find a balance there and to determine who’s going to handle what but to both be a part of it. If you’re in a married relationship or a committed relationship with somebody, it’s important that you’re both on the same page and both proactive in personal financial matters so that both know where things are.
The organization is there so that you can find what you’re looking for. Now, those who coach with me, I give them a very comprehensive financial organizer. I call the financial scorecard. It has a list of documents that you need to gather and organize. It’s got a place to put your background, personal information, credit score, income sources, and different business entities that you have. It’s got a place for a financial vision statement to set a purpose in your life.
I talked about that in another episode. You can find it in the playlist. There’s a place for your balance sheet where you own versus what you owe. There’s a place for your personal financial statement, the income versus the expenses, and whether you’re profitable or not. There’s a place for your protection information. All your insurance products and your estate planning.
There’s a place for advisor networks. Who’s on your team or not on your team? That might be very insightful as far as getting organized is, who’s on your team? Do you have a financial team? Do you have advisors on the legal side, on the accounting side, on the coaching side, insurance, and investments? Do you have people in your corner you can truly trust? Do you have a proactive relationship with that you can interact with and get good information that you can then take action on?
There’s a section on your loan details so you can evaluate loans and determine which ones to pay off in which order so that you can accelerate your success financially. That’s a lot of the organized piece around personal finance. We’ve established this personal finance fence and the core components of personal finance and how taxation is important to be aware of how that works to minimize tax because it’s the biggest expense we all have.
If we’re not proactive there, we waste money on taxes. We let it go because we’re scared of the IRS. I find so many people who are scared that they might get audited and be thrown in jail. It doesn’t happen that way. Audit just determines whether or not the deductions you took were valid. If you have documentation to back them up. It’s as simple as that. It’s not that easy to go through. I personally haven’t been through one yet, but I have many people I know who have. Although, they’re frustrating. You can still get through it quite easily as long as you’ve got good documentation.
If we’re not proactive with taxation, we just waste money on taxes.
Systemize Your Personal Finance Managment: Creating Consistency and Clarity
Again, being proactive and taking personal finance personal allows us to get through some of these what might be stressful things much easier. We’ve talked about Organization. We’re talking about systems now. To manage money, we need to have a system. We need to have a way to measure what’s coming in, and what’s going out. There are tracking tools and plenty of software platforms out there that help out with this.
I don’t personally endorse any of them because honestly, I believe that software often is distracting from managing money. We end up managing the software platform instead of managing the money. Money management is about looking at your bank statements, acknowledging what you’re spending on average, and determining then the categories of spending that matter to you. If they’re sufficient, if you need to expand or retract some of the categories, I want you to keep it simple no more than 20 to 25 categories.
I want you to manage money and not software. I’ve got a tracking tool that is available to you for free. You might look that up. You might look and find the link for that. It’s a simple online Google spreadsheet that allows you to track your income and your expenses and do some planning. Now, a lot of people hate the idea of a budget and I do as well. I hate budgeting because it tends to feel restrictive. I love the concept of proactive spending planning or cashflow planning.
This tool is intended to help you see your cashflow. Track your cashflow and see how you did compared to what you thought you were going to do and not feel good or bad about yourself necessarily. Acknowledge it. Be a good steward of your money so that you have this tool to know how you’re doing and to be able to populate a financial statement called a profit and loss or an income statement. They’re the same thing, just slightly different names. You want to measure how profitable you are because if you’re not saving anything from your income. You’re probably spending it all living paycheck to paycheck because you don’t have a clear vision and purpose in your life.
Optimize Your Personal Finance: Fine-Tuning for Financial Efficiency
If you’re feeling like you’re spending everything and don’t have a clear purpose. That’s something that you hire coaches for. Coaches often help you find purpose and get clear on what that is so that you can align your financial decisions with purpose. The next component, once we’re organized and systems are in place. We’re tracking and managing. We’ve got a series of accounts that are in place, then we can optimize.
Once we know what’s going on, we can start to tweak things. Does this subscription make sense to me? Does it truly align with my values? Does this insurance product make sense to me? Do I need to increase my coverage, decrease my coverage, or add a new coverage? Am I missing my estate planning? Should I put that in place? Do I do just a will? Do I do a revocable living trust? Do I do it all? Do I do just a part of it?
We look at our investments. Is the 401(k) or IRA that I have served me well? Do I have sufficient liquidity? Should I stop funding it for a while so I can pay off some debts? Should I stop funding it at all because I don’t want to be in a government partnership where I lose access to my money? It can only be in risky investments. I’m in a partnership with the IRS where they say I can only access my money at age 59 and a half or older. Otherwise, I’m going to pay an extra 10% tax.
I don’t want to be in a situation where I’m forced to pay extra tax if I need access to my money. Some of you may go, “I didn’t even know that was a thing.” It’s a thing. You are in a partnership and we need to know the terms of that partnership. It’s good practice to be proactive in how we choose partners in our life like you did with a spouse or a committed relationship that you’re in or possibly a business partner. We look at things like our spending planning.
Maximize Your Personal Wealth: Strategies for Growth and Abundance
Having a good tracking system allows you to determine if the expenses are truly aligned with your values. You can let go of things that aren’t a good fit. Wasted money on subscriptions and spending. Overspending perhaps on dining out or travel. Is this unnecessary? That doesn’t truly meet your highest values. That’s optimization. That way we have more money with which to maximize our future. This is my favorite part of personal finance.
After we get that other stuff out of the way, we can maximize it. Maximizing is about turning the surplus cash that you’re setting aside in your savings and now learning how to invest. Investing is so broad. You can invest in so many ways in real estate, in businesses, in your own business, and in other people’s businesses. Ultimately, investing and putting money to work is about putting people to work. I might have to do a whole other episode on this topic.
In essence, the only way you put money to work is to put other people to work. You have to hire people to do things on your behalf that can create more income than you could create on your own. That’s what businesses do. They have an idea of something they want to deliver in terms of a good or service. They then hire people to go out and market it, produce the product, produce the service, and deliver the service.
The only way you put money to work is to put other people to work. You have to hire people to do things on your behalf that can create more income than you could create on your own.
In doing so, a certain income is created from each product that’s sold or services sold. If your expenses to provide that service are less than the income you generate, then you have a profit. That profit can be used to expand and grow. That’s how we start the compounding process. When we have assets that we engage, we earn more than what it costs us to own those assets, then we have net profit and that can compound into more and more assets over time.
The safest and simplest place is bank accounts, money market accounts, certificates of deposit, T-bills, municipal bonds, and whole life insurance cash values. Those are all safe places to store cash that have very little risk and are easily accessible. That’s the foundation. They have some growth, but it’s not substantial growth. When we have enough growth and enough cash, we can start learning how to invest. That’s what maximization is all about. That’s a lifelong work. It’s learning the skill of being a well-educated investor. We’ll wrap it up here. Thanks for participating in this particular episode as we dealt with the method of being O.S.O.M. money masters. We’ll see you in the next one.