Certify Your Own Finances

You can't evade responsibility as easily as some CEOs have. If you don't get your finances in order, you'll pay dearly later.

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By Robert Brokamp (TMF Bro)
August 14, 2002

Today's the day. The chief executive officers and chief financial officers of the biggest American companies will have to certify the accuracy of their companies' numbers. By making executives personally liable for the truthfulness of their financial reports, the SEC hopes that business bigwigs will take a more hands-on approach to management. (By "hands-on" we mean "I know what's going on and I'm not going to deceive anyone, or I'll have to forfeit my $10 million bonus and share a cell with murderers, rapists, and Ken Lay.")

Today is also the last day of our series on getting your own finances in certifiably good condition. Despite the scandals, mis-reportings, and other corporate shenanigans that are bound to surface, nothing will have as much of an impact on your money as the little tricks you pull with your own finances.

You heard us right -- tricks. Tomfoolery. Sleights of hand. Outright lies. You know, when you buy something you can't afford but justify the expense with some fancy accounting. Or when you decide that opening an IRA should be a top priority... for next month. Or when you fob off your responsibility for your finances by claiming it's your spouse's job. Or when you choose to go a few months without health insurance. ("Look at how much I'll save... ouch! My nose!")

Unfortunately, spotty money management -- whether intentional or not -- eventually stings. You can't evade responsibility as easily as some CEOs have. (After all, your shareholders -- i.e., your spouse and kids -- know where you live.) If you don't get your finances in order, you'll pay dearly later.

Over the past week or so, we've encouraged you do a little financial footwork: Determine how much you're worth, track your expenditures, set some goals, implement a savings plan, and cut back on your spending. (What -- you haven't been following along every day? Then click here for the home version so you can play along.)

Why bother?
Why should you do all that work, especially now that football season has begun? Let's consider what might happen to people who play fast and loose with their finances:

  • They'll pay higher interest rates on their debt -- or won't be able to get a mortgage or car loan at all -- because their credit records stink.
  • It's time for their kids to go to college, and there's no dough.
  • Credit cards take over their lives, and they are relegated to the debt dungeon for years.
  • Some short-term disaster wipes out their long-term savings because they didn't have an emergency fund.
  • By the time they reach their 60s, their retirement savings will be enough to sustain a three-month sabbatical. Then it's back to work.
  • They regularly ask themselves, "Where did all my money go?"

Doesn't sound like much fun, does it? But there is really good news: You can avoid all that bad stuff. In fact, you can increase your net worth -- and significantly increase the chances that you'll have the money you need -- with a few simple steps. If you've followed our suggestions from the past few days, you're well on the way to being able to testify -- under oath, with one hand raised and the other on The Joy of Cooking -- that your financial plan is accurate, complete, cocked, and loaded.

Control what you can
"But what about the stock market?!" you ask. "How can I plan when I don't know where to put my money?" Believe us: We feel your pain. But the question of when to invest in stocks is actually pretty far down the path to fiscal fitness.

The fact is, you can't control the financial markets. But you can control how much you spend and how much you save. There are entire cable channels -- even websites, so we hear -- devoted to the daily dartings of the Dow. However, we might be better off with channels devoted to living below our means and saving more of our beans. The next time you ask yourself "How did the market do today?" follow up with "How can I find a way to sock away another $100 a month?"

Become certifiable
To comply with the SEC's mandate, CEOs and CFOs will have to file a sworn written statement (which is available online). Not to be outdone, we have also provided a statement for you to sign once you have taken the necessary steps to put your finances on a firm foundation. It will only take 10 to 20 minutes a day to drastically improve your balance sheet, cash flow, and net worth. So take the time to start now -- don't procrastinate. Then, celebrate by signing the following statement and treating yourself to dessert out. You'll deserve it.

Statement of Principal Executive Officer(s) Regarding Facts and Circumstances Relating to Getting Your Act Together

This is to certify that _____________ [name(s) of principal executive officer(s) of the household] has/have:

(1) Created a personal balance sheet to determine how much is owned and how much is owed. This figure will be used to determine if overall household net worth is growing over the years.

As of this date, my/our net worth is $__________.

(2) Tracked spending to see where all the money went, and decide whether monthly Home Depot and/or Macy's binges are worth the 10% of gross income they're consuming.

The three least effective uses of my/our money have been:

1. _____________________

2. _____________________

3. _____________________

(3) Set clear financial goals so I/we know where we want the dough to go.

My/our top three financial goals are:

1. _____________________

2. _____________________

3. _____________________

(4) Implemented an automatic savings plan so money is sent to priorities before it is spent on frivolities.

On a regular basis, money is directed to the following accounts (e.g., 401(k), IRA, money market, college savings plan):

1. _____________________

2. _____________________

3. _____________________

(5) Chosen to live below my/our means in order to save more for my/our goals.

I/we will make the following money-saving moves:

1. _____________________

2. _____________________

3. _____________________

So let it be written. So let it be done.

Signature and date

Signature and date (if a partner is involved)

If you need help certifying your finances, TMF Money Advisor is always there for unconflicted advice.

Robert Brokamp and his co-CEO intend to certify their financials by the end of this month. If they pull it off, they earn the reward of a night out -- sans kids. If they don't, they have to eat leftovers until they do. The Motley Fool is investors writing for investors.