Why you need a Closed Circle, Part 2

As discussed in my other blogs on the Closed Circle Budget, when creating and managing a Closed Circle we should break down our spending into Obligations, Necessities and Wants.  Obligations are items that you are obligated to each month, Necessities are things that are needs but are not obligated to, and wants are your material wants.  For more on creating a Closed Circle in more detail, please see my other blogs.

One of the main reasons we create a Closed Circle is so we can have regular overflow in our life.  Overflow is the abundance of finances that come in above and beyond your closed circle.  Once you have answered the question as to “How Much is Enough?” you can then decide where overflow will go.  Overflow can be used for many different things. Overflow can be used for Accumulating Wealth and Creating Passive Cash Flow (investing).  It can be used to pay debt faster, give more or to help you achiever other goals that you and/or your family may have.

Let’s face it. The majority of people in the world are not operating on good financial principles.  2 of the main superpowers in the world, the United States and Europe are both in great financial trouble!  Do you think any of their financial troubles could have something to do with the way they spend?  Don’t get yourself into financial trouble and become a slave to debt, instead take control of your finances with a Closed Circle!  To learn more about the Closed Circle, read more of our blogs, contact us, and come attend one of our Financial Boot Camps!

Why you need a Closed Circle, Part 1

In seeing how houses are built, we find that the first step before building the framework, electrical and plumbing, is the foundation.  Without a strong foundation, everything else is irrelevant!  Storms will come, and when the foundation is strong the house will stand.  In life, all kinds of storms come including relational, health and financial storms.  In each area, you need to have a foundation.  In the area of finance, a closed circle can be your financial foundation.

A Closed Circle answers the question “How much is enough?” If you cannot answer that question then no amount will ever be enough and you will spend everything you make no matter how much you make!  Imagine that, not having enough money to accumulate Wealth or even have enough to retire on!  Funny enough the majority of people in the world are in exactly this position!

A Closed Circle also brings agreement, which is a major contention among people and relationships.  When there is agreement, there can be little to no arguing over finances. When there is agreement there can be growth and success in the pursuit of goals!  When we answer the question “How much is enough?” it allows us to have peace at all times over our finances!  

Step 2: Eliminate Bad Debts part 3 -- Paying Down Debt

As a rule, you will usually pay down your debts with the highest interest first, using three ways:

1. Closed Circle: Establish budget totals to determine your available income to service debt on a monthly basis.
2. Overflow / Abundance – As you close your circle and take control of your finances, you will have overflow that will allow you to get out of debt faster.
3. Debt Reduction Strategies – There are several strategies that can help you get out of debt such as debt consolidation.

What’s next after the Closed Circle Budget?

Creating your Closed Circle Budget is your first step to financial freedom. It is in this initial step that you build on a solid financial foundation for you, your family and the future generations of your family. You must practice all the 5 Steps regularly before you can truly reach financial freedom. Here’s an overview of what these steps are:

1. Develop a Closed Circle Budget
2. Eliminate Bad Debt
3. Legally Minimize Taxes Paid
4. Wealth Accumulation and Increase Passive Cash Flow
5. Wealth Preservation

The Closed Circle and the Business Owner part 2

The Closed Circle for business owners works very similar to a Closed Circle for Individuals. You should still use the same steps as you did to create your personal Closed Circle. However, the main difference is that you have to do a lot more forecasting as your business will grow.

Closed Circle for business owners must also be reviewed regularly and changed as the business goes through growth and changes.

Also, since we get paid personally from our business, we must factor that into the Closed Circle. We know how much we need for our personal Closed Circle. Therefore, we should budget the amount we will pay ourselves in the obligations section of your business’ Closed Circle.

Tips on the Closed Circle

How you can you ensure an effective and successful Closed Circle? Here are a few important points to remember:

• It is very important for married couples to agree on their Closed Circle. One of the main causes for divorce is division over finances. When a couple agrees on “How Much is Enough”, finances are much less of an issue.
• Be diligent and consistent with your Closed Circle, enter your receipts daily or weekly.
• Your Closed Circle should be reviewed and adjusted annually and upon any major life changes.
• Accountability is important. If you are married, your spouse is your accountability partner. If you are single, you need to appoint a family member, friend or mentor to be your accountability partner.

I hope you have more of an understanding about the Closed Circle budget by this time. If you need my help in clarifying some points, let me know. I will be glad to help!

Money Talk

We were never meant to be slaves to money. We always get caught up with the pursuit of money that we tend to forget who’s working for whom. Money is meant to be our slave. When money becomes our slave, we are freed from the pursuit of money. And when we are freed from the pursuit of money, we can accomplish our purpose in life. Knowing where your money is at and where it is being spent is the first step to making it your slave.

Having a Closed Circle Budget is well worth every effort, time and money.

Overflow & Abundance part 2

Here are a few more of my insights about overflow and abundance. .

The position we want to be in is where our income is above our closed circle. This puts us in an overflow position, where we are not living “Paycheque to Paycheque”. The overflow can be used for paying down bad debt, investing, planned giving, or in other areas that will help you achieve your goals. Do not spend your overflow foolishly, otherwise it is the same as living in an open circle. It is best to agree before hand on where the overflow will go. Establish a firm closed circle and use your overflow to live in abundance!

I hope I have given you a clear picture on this topic. If you have comments or questions, please just let me know and I will be glad to help you out. I hope to hear from you soon!

Best regards,

Michael Lepitre

Overflow & Abundance part 1

Over the next few days, I’ll be talking a little bit about Overflow & Abundance that comes from a Closed Circle Budget. Please read on . . .

Our Closed Circle answers the very important question “How much is enough?” The closed circle is broken down into 3 categories; obligations, necessities and wants. Once we have determined our closed circle, we now compare it to our income. If our income is less than our closed circle than adjustments need to be made. We either need more inflow of income or we need to decrease items in our closed circle.

- Michael Lepitre

The Closed Circle

It seems today that a lot of people are living in what we call an Open Circle - the more money they make, the more money they spend. And when there’s a drought in life and the economy is bad, many people continue spending like they did before.

A lot of these people do not realize that they’re going into an Open Circle until it is too late. They spend more and get into more debt. Things continue to get worse for them until they are unable to pay their bills. They eventually end up having to consolidate or re-finance to be able to keep up with their debts. Some people even have to go as far as filing for bankruptcy.

Living in a Closed Circle will allow you to know the answer to the question – how much is enough? In a marriage, having a spouse in agreement is always the most important thing. Husbands and wives in disagreement especially on a major issue like finance can cause arguments, stress and even worse, divorce. If we get into the idea of a closed circle and answer the question, how much is enough, spouses can have an agreement on their finances, stick to this agreement and live in abundance and overflow. Michael Lepitre