At first you might think you’re improving. But for the sake of comparison, let’s consider putting that same time and effort into practicing the piano. Would your skill level in each be comparable after practicing these tasks for a few hours every week, say, over a few months’ time? Maybe.

Let’s extend that time period to a year. What would you be accomplishing on the piano now compared to your money management efforts? What about five years down the road? By this point you could easily be performing wonders on stage with that piano.

How’s your money management skill and productivity level doing? Are you still tracking that loose change on your mobile app after every cup of coffee you buy? At this point you may realize that no matter how many more years of time and effort you put into “practicing” money management, your skill level and productivity will never comparatively improve.

There’s only one reason your personal money management proficiency and productivity stalled long ago but your piano playing skills continue to soar higher.

Figuratively and literally speaking, when first learning to play the piano (like learning money management), you have to first map out where all the notes are on the keyboard (where all the money is in your life), to gain an understanding of what’s before you before you can begin to play your first two-finger tune (actually start making money management decisions). But here, is where your money management skills get left behind and your piano playing skills break out.

Without a second thought, when playing that piano the second time, you’d take for granted the fact that all the notes on the keyboard were in the same place they were the first time. So quite naturally, with “practice” (doing the same thing over and over—an important distinction), you’re able remember the position of the notes and move on to the next level and practice managing those notes into the true skill-building part of actually playing a song.

In contrast, when managing your money the second time, you have to first figure out where all your notes are again (timeframes, income, expenditures, balances…) because they’ve all changed position since the last time you “practiced”. It’s at this point you might realize, the only thing you’re practicing, is finding notes.

The reality is, if you keep managing your money this way, you’ll have an entirely new keyboard arrangement (financial picture) in front of you every single time. So in essence, you’re starting over every single time. This is the reason you can’t improve your money management skills to the same degree you can improve your piano playing skills.

Let’s turn this concept around, and now ask yourself, after five years, how good you would be at playing that same simple song on that piano, if every time you sat down to play it, you had to first figure out where all the notes were? Maybe you recognized that problem early on so you decided to employ the latest high-tech note-finding software. But how’s your skill level at actually playing that song? Improving? How about five years from now?

You’d might come to realize that no matter how well you mastered your note-finding abilities, your performance threshold has never really gotten off the ground–and will never get off the ground, because your understanding, knowledge and wisdom of the keyboard (your financial picture) will always be limited because it’s never the same.

But now consider what might happen to the whole concept of money management if your money (timeframes, income, expenditures, balances…) stayed in the exact same position you left them the last time…and the time before that. To get a real good idea of what that experience might be like, just consider what happens to a musician as his skill level grows at playing that piano.

Consider for a fact that it doesn’t take long for a musician to stop thinking about the notes on the keyboard entirely (can you imagine?). The musician’s initial time and effort to “account” for the notes (pun definitely intended) has naturally advanced to the organization and management of the notes (song playing/money management). With time, through simple repetition and memory, his song playing grows more intricate and precise, while the ease and effort at playing them becomes more elementary. His knowledge of the keyboard has moved into a completely intuitive state (invisible?) and he’s now operating at a level of mastery, accomplishing so much more with only the slightest of effort.

Thousands of people, performing a thousand different activities, are reaching mastery level everyday. If you’re already investing time in managing your money, there’s only one reason you can’t reach mastery level…you’re mistaking note-finding for money management.

All this talk about music get’s me creative…let’s see:

Interestingly enough, there’s another definition for the word “mean”: the strict mathematical definition. It’s a statistical term meaning “The average value of a set of numbers”. It has a less philosophical definition and is far more measurable and can be applied very usefully toward personal budgeting and money management.

So in that context, let’s rephrase that age-old question to: “Are you living beyond your mean?” More precisely, are you living beyond your “average” income month to month? Do you even know what your average monthly income is…or what your average monthly living expenses are?

You should. Because knowing your “mean” income to-date, and measuring it against your “mean” expenses to-date, is an extremely precise gauge of whether you’re slowly creeping into debt.

Let’s take a closer look at averages

Averages take what’s variable, random and uneven, such as 34+56+8+21+4+75+5 (totaling 203 here) and then divides it by the number of data points (which is seven in this case). The average here equals 29 (203 divided by 7). So 29 is your mean…an invisible number you can’t see when just looking normally at all these variable figures.

So how do you incorporate the use of averages in personal budgeting?

Basically, through the entire year, you calculate and monitor what’s called a “running average”. You collect data like you normally would for income and expenses during the year. The difference is you don’t just total and compare individual monthly sums.

When calculating and tracking your running monthly average, you’re continually adding current monthly data to your previous monthly data, and dividing it by the number of months of data you’ve collected. This gives you a single, constantly updated, monthly average figure all year long.

Using this technique, we’re interested in calculating and comparing two very important figures; your average monthly income-to-date, and your average monthly spending-to-date. These two “mean” figures are ultimately what you want to keep your eye on.

So by comparison, when managing your money by averages, your income and expenses aren’t measured independently month by month, and they’re not compared against the amount of money you have in hand today or what’s coming next week, or at any one point in time.

So exactly how is this a better way to manage money?

Life happens. It goes up and down and all around. It’s unpredictable and highly variable. Variability makes it difficult for us to recognize trends or patterns but we can easily see through this variability by using averages. So let’s take it to the next level.

Let’s take a new set of seven numbers such as 10+3+14+15+61+40+60 and say they’re a total of what you’ve spent on a budgeted item over the last seven months.

A typical budget-minded person who allocated $30 per month for this expense, would struggle with this variability relative to their static budget figure of $30 per month.

They attempt financial control by managing each month individually, attempting to stay under the $30 budget figure. They then start over the following month with a clean budget slate and will try again the next month – and will either succeed or fail each month.

To the contrary, if that same person had a larger perspective of their financial life and continued to track their spending activity as before, but now periodically calculated their running monthly average for this expense, they could easily see through the distraction of variability.

For instance, the first thing they would come to realize is that even if they spent the figures in the original set of seven numbers we mentioned in the first example (34+56+8+21+4+75+5), the result would be exactly the same as the new set of numbers we used in the second example (10+3+14+15+61+40+60). There is no difference. Both total 203 and have a mean of $29 per month

The point being, regardless of all the variability and effort to “stay on budget”, and then win or lose that objective each month, it didn’t really matter. The same amount of money was being spent.

The second thing is, normally, a $30 budget figure would be considered a number you can’t exceed each month. In the land of averages, you have to remember this $30 is an “average” figure, not a single month maximum. It’s a bit of a paradigm shift.

So the money manager calculating a running average all year long can see right through monthly variability, and more; he now has the ability to recognize even the slightest of monthly average spending “trends” for this expense. This is impossible using individual month to month budgeting techniques.

He can also see that year-to-date, regardless of the distraction of high variability, he’s actually still under budget by $1 per month over these last 14 months ($29 avg per month actually spent versus $30/month budgeted).

Would the traditional money manager even come close to knowing that?

When making decisions based on your mean, you’re taking into consideration many months of income and spending data, and continually determining a surprisingly stable, single, average monthly figure. Each month that’s added to this equation has a proportional effect on the end result. What you spent in April and May has a proportional effect on what you’re about to spend in August. Your mean figure is a continuously distilled result of the highs and lows of your financial life all through the year.

Tracking your mean figure easily removes the distractions of variability and is very telling of where you’ve been, where you are, and more importantly, where you’re going. You can reliably plan your future and easily stay out of debt because your planning and spending decisions are guided by your mean income and mean spending to-date, regardless of what you have (or don’t have) in hand at any one point in time.

The more variability you have in your life, the more you need to utilize the power of averages. You should apply this basic mathematical science to your personal budgeting efforts and monitor both your average monthly income and average monthly expenses. You’ll know that two bad months divided by a great month is actually three good months and you’re doing just fine. And you can just about guarantee that you’ll continue to do just fine, regardless of your immediate financial state…as long as you don’t live beyond your mean.

Lee Roesner is an author and business owner in Northbrook, IL. He’s creator of MoneySlinger™ Speed-Budgeting™ Personal Finance System.

Why build an online application versus a download-and-install application? The world is going mobile. An online application allows you to access your budget from any location or from any computer device (mobile extensions are also planned), and it also means software updates are done automatically across the board.

Chinese numerology and Feng Shui for 2011

This year we are going to experience four unusual dates: 1/1/11, 1/11/11, 11/1/11, 11/11/11, and that’s not all; Take the last two digits of the year you were born and the age you will be this year and the result will add up to 111 for everyone!!!! This is the year of MONEY. Also, this year, October will have 5 Sundays, 5 Mondays & 5 Saturdays. This happens only once every 823 years.