Many successful people have mentors to guide them in learning the skills that lead to achievement, and Ill do my best to offer you some critical personal finance perspectives. They say that life is a school where you learn the lesson after the test. The same thing applies to money, but you cant go back in time to fix catastrophic financial mistakes that you have made over time. As long as you are alive, you are a player on the field of the money-game, and you need to know the basic rules before you get tagged by the experienced players.
Rule #1: To earn money from money. The only way to escape becoming a wage slave for the rest of your life is to set aside savings. The profit on your savings can be used to increase your lifestyle spending, reduce the number of years until you retire, or allow you to actually have any retirement at all. How are you doing so far toward saving and getting it to earn money for you?
Every dollar that you spend eliminates its ability to earn money for you in the future. I am not recommending that you stop eating at restaurants and going to movies, I am recommending that you use some common sense, like looking at your four biggest expenses over the last few months and aggressively finding a way to reduce them.
The biggest obstacle for the first rule is personal debt of any kind (other than a mortgage for your home) or a lease of any kind. Every personal debt that you incur reduces your net worth which could have been working for you over your life time. Acquiring personal debt is exactly like putting a large hole in your wallet. In the money-game, a huge transfer of wealth occurs between the Haves and the Have-Nots over the words, I can afford that monthly payment. Here is a hint: the Have-Nots are the ones who make that statement. So please dont ever look at whether you can afford a monthly payment to make a purchase; pay in cash after youve saved for the item. [Everything that you buy with a 0%-interest payment plan must be over-priced. Behind the scenes, your payment contract is sold to a lender with an interest rate, and retailers dont do this without building-in an acceptable profit for themselves. Ask retailers how much the item will cost if you pay in full, and you could get a lower price.]
Rule #2 Always keep your finances under control. The first step in losing financial control and spiraling into debt and money problems is simply not dealing with personal finances. Prepare for catastrophic financial accidents with health, life, disability, and auto insurance. Plan and save before you buy something. Create a balance sheet for yourself at least once a year to see how you are progressing. Pay every bill on time, or contact the creditor to tell them what is going on and make a partial payment. If you are temporarily unable to handle any of this, ask for some help immediately and find someone trustworthy who will do this for you.
The most common source of financial trouble is a trauma in your life. This can be a health problem (large expenses or unable to work), an emotional problem (divorce or loss of loved one), or a financial problem (losing a job, cut in pay, relocation, unexpected expenses). Whichever the source may be, it leads to three emotional problems: the first is denial, the second is being overwhelmed, and the third is hopelessness. Denial causes people to not open their mail and continue spending as usual, and being overwhelmed paralyzes people from getting assistance and dealing with the situation. For example, if you just lost a loved one, balancing your checkbook and paying bills is not high in your priorities. Unfortunately, tiny amounts of debt grow with interest and penalties into seemingly insurmountable mountains of debt; leaving you with loathsome options such as bankruptcy, poor credit, declining lifestyle spending, and added stress that you bring to relationships and work.
Rule #3 Pay attention to the finances of the people with whom you spend the most time. Whether they are relatives, friends, or co-workers, these people have the most impact on your financial life. Do they consistently follow the first two rules of the money game? Do they earn about the same money as you? If the answer to either of those is no, then I recommend that you start spending a little less time with them; and this is why. If they dont consistently follow the first two rules, it is unlikely that you will either. You unconsciously model the people around you, and the more people you are exposed to that dont follow the first two rules, the more likely that you will unwittingly follow them. No one thinks they are trying to keep up with the Joneses, but we all do it to some extent, and this is the mechanism. On the other hand, if they earn a lot more money than you, you may rack up a lot of debt trying to keep up with them (meeting them at their favorite expensive restaurant, joining them for another expensive vacation, buying a new car because yours is the junker among all of your friends, etc.) On the other hand, if most of your friends earn a lot less than you, you will turn into the groups banker. For example, youll find yourself in the pattern of putting your credit card down to pay for dinner and theyll all say theyll pay you back later, but 50% of them never do; and they dont mind taking advantage of you because, after all, you earn a lot more than they do. Or, you and your friends need to pay a deposit for renting a house and they expect you to write the checks because you have the money available and they do not.
The neighborhood that you live in also creates financial pressure to violate the first two financial goals. Your neighbors are likely to become friends (and Ive already gone over this), but they also influence the size of your home, extent of your landscaping, price of furniture, and the size of your TV. So pay very close attention to the finances of your neighbors if you dont like how they are measuring up for first two rules, move somewhere more in alignment with your financial goals. If your family and friends, dont measure up financially, find some additional people to spend time with that have financial habits that youd like to emulate and learn from. I have friends with a wide range of income, but it is much more difficult to follow the first two money rules when I am with the extremes from my own income. Youll just find it easier to reach the next rule when the peer group that you hang out with aligns closer to your economic level.
Rule #4 Accelerate the other three rules:
Add to your savings by increasing your income through advancing your career. It doesnt matter whether you enjoy it; it is a means to an end with the end being progress toward the fulfillment of rule #1. Increase the amount that you save by aggressively lowering four of your highest expenses. Start spending time with people that talk about investing money and are systematically building their wealth the fastest. The combination of all four of these rules will hopefully offer a next-step for you to take today to start getting more wins in the money-game.
Many successful people have mentors to guide them in learning the skills that lead to achievement, and Ill do my best to offer you some critical personal finance perspectives. They say that life is a school where you learn the lesson after the test. The same thing applies to money, but you cant go back in time to fix catastrophic financial mistakes that you have made over time. As long as you are alive, you are a player on the field of the money-game, and you need to know the basic rules before you get tagged by the experienced players.
Rule #1: To earn money from money. The only way to escape becoming a wage slave for the rest of your life is to set aside savings. The profit on your savings can be used to increase your lifestyle spending, reduce the number of years until you retire, or allow you to actually have any retirement at all. How are you doing so far toward saving and getting it to earn money for you?
Every dollar that you spend eliminates its ability to earn money for you in the future. I am not recommending that you stop eating at restaurants and going to movies, I am recommending that you use some common sense, like looking at your four biggest expenses over the last few months and aggressively finding a way to reduce them.
The biggest obstacle for the first rule is personal debt of any kind (other than a mortgage for your home) or a lease of any kind. Every personal debt that you incur reduces your net worth which could have been working for you over your life time. Acquiring personal debt is exactly like putting a large hole in your wallet. In the money-game, a huge transfer of wealth occurs between the Haves and the Have-Nots over the words, I can afford that monthly payment. Here is a hint: the Have-Nots are the ones who make that statement. So please dont ever look at whether you can afford a monthly payment to make a purchase; pay in cash after youve saved for the item. [Everything that you buy with a 0%-interest payment plan must be over-priced. Behind the scenes, your payment contract is sold to a lender with an interest rate, and retailers dont do this without building-in an acceptable profit for themselves. Ask retailers how much the item will cost if you pay in full, and you could get a lower price.]
Rule #2 Always keep your finances under control. The first step in losing financial control and spiraling into debt and money problems is simply not dealing with personal finances. Prepare for catastrophic financial accidents with health, life, disability, and auto insurance. Plan and save before you buy something. Create a balance sheet for yourself at least once a year to see how you are progressing. Pay every bill on time, or contact the creditor to tell them what is going on and make a partial payment. If you are temporarily unable to handle any of this, ask for some help immediately and find someone trustworthy who will do this for you.
The most common source of financial trouble is a trauma in your life. This can be a health problem (large expenses or unable to work), an emotional problem (divorce or loss of loved one), or a financial problem (losing a job, cut in pay, relocation, unexpected expenses). Whichever the source may be, it leads to three emotional problems: the first is denial, the second is being overwhelmed, and the third is hopelessness. Denial causes people to not open their mail and continue spending as usual, and being overwhelmed paralyzes people from getting assistance and dealing with the situation. For example, if you just lost a loved one, balancing your checkbook and paying bills is not high in your priorities. Unfortunately, tiny amounts of debt grow with interest and penalties into seemingly insurmountable mountains of debt; leaving you with loathsome options such as bankruptcy, poor credit, declining lifestyle spending, and added stress that you bring to relationships and work.
Rule #3 Pay attention to the finances of the people with whom you spend the most time. Whether they are relatives, friends, or co-workers, these people have the most impact on your financial life. Do they consistently follow the first two rules of the money game? Do they earn about the same money as you? If the answer to either of those is no, then I recommend that you start spending a little less time with them; and this is why. If they dont consistently follow the first two rules, it is unlikely that you will either. You unconsciously model the people around you, and the more people you are exposed to that dont follow the first two rules, the more likely that you will unwittingly follow them. No one thinks they are trying to keep up with the Joneses, but we all do it to some extent, and this is the mechanism. On the other hand, if they earn a lot more money than you, you may rack up a lot of debt trying to keep up with them (meeting them at their favorite expensive restaurant, joining them for another expensive vacation, buying a new car because yours is the junker among all of your friends, etc.) On the other hand, if most of your friends earn a lot less than you, you will turn into the groups banker. For example, youll find yourself in the pattern of putting your credit card down to pay for dinner and theyll all say theyll pay you back later, but 50% of them never do; and they dont mind taking advantage of you because, after all, you earn a lot more than they do. Or, you and your friends need to pay a deposit for renting a house and they expect you to write the checks because you have the money available and they do not.
The neighborhood that you live in also creates financial pressure to violate the first two financial goals. Your neighbors are likely to become friends (and Ive already gone over this), but they also influence the size of your home, extent of your landscaping, price of furniture, and the size of your TV. So pay very close attention to the finances of your neighbors if you dont like how they are measuring up for first two rules, move somewhere more in alignment with your financial goals. If your family and friends, dont measure up financially, find some additional people to spend time with that have financial habits that youd like to emulate and learn from. I have friends with a wide range of income, but it is much more difficult to follow the first two money rules when I am with the extremes from my own income. Youll just find it easier to reach the next rule when the peer group that you hang out with aligns closer to your economic level.
Rule #4 Accelerate the other three rules:
Add to your savings by increasing your income through advancing your career. It doesnt matter whether you enjoy it; it is a means to an end with the end being progress toward the fulfillment of rule #1. Increase the amount that you save by aggressively lowering four of your highest expenses. Start spending time with people that talk about investing money and are systematically building their wealth the fastest. The combination of all four of these rules will hopefully offer a next-step for you to take today to start getting more wins in the money-game.
In Debt Over Your Head? These 5 Simple Steps Will Help
The next 5 steps are not difficult. They only take commitment. You can do it. The feeling of freedom and success when the bills are not hanging over your head will make this all worthwhile.
Ready to get stated? Let’s go.
Step #1. Work out where you are now
You may not have looked at your financial position for a while. Maybe that’s why you are suffering under a load of debt presently. But you need to take stock of your financial position now. Unless you know where you are now, it’s hard to work out how to fix things.
Just get a pen and paper and all your credit card bills and look at the situation honestly. List out all your debts and their interest rates and the minimum monthly repayments.
Don’t get worried about how much you owe. It’s been said that anyone can get rid of all their debt within 5-7 years, including their mortgage. That means you too.
Step #2 Stop spending more than you earn NOW
This is the first thing that must be done to start the ball rolling for your financial success. This is most probably the reason you need to take action now. Look at your living expenses and cut out those things you can’t afford.
Also cut up all the credit cards except one for emergencies and commit yourself to only spending what you can afford from your own income.
Step #3. Find some cash to pay down those debts
Once you have come to grips with Step #2, the next step is to work out ways to put some money aside every week or month to start paying down those debts, preferably faster than the minimum monthly requirement. Pay as much as you can. It’s better to pay down these debts than to put the money in the bank. This is because the credit card interest is a lot more than you can receive from the bank for funds on deposit. The aim is pay down the highest interest debt first.
If you have 2 credit cards with the same interest rate, pay off the one with the smallest balance first. That will give you a boost and the resolve to keep on going.
Step #4. Build a Savings Fund
Once you have those credit cards under control it’s time to think about putting some funds aside to start building some savings. You’ll be surprised how fast your money grows if you religiously keep adding to the balance and don’t touch it. If you really need to purchase an expensive item like furniture or car it is better to save for it than to borrow, if at all possible.
Step #5. Pay Down That Mortgage.
Since the interest rate on your mortgage is usually a lot less than credit card and store debt you can leave this item till last. Also it is increasing in value over time – unlike your car, TV, Video, furniture and boat. You will be surprised how many years you can cut off your mortgage repayments by just adding a few extra dollars each month to the payment.
These a just a few basic rules to help you get back on your feet financially. The main principle here is to work on reducing your credit card debt. Once that is done use those freed up funds to build your nest egg and pay off the mortgage. That’s the plan that works.
Now get those documents out, do the sums and start on your road to financial freedom.
If you understand and follow the basic principle of Cash is King you can change your life forever. Your life will be less stressful financially and you will be taking your first major step toward financial peace of mind.
Cash is King is an easy principle to understand; however it may be difficult to follow. This principle is the key to less stress within your financial life. Many things tell us how to manage our finances and it seems that none of them address the root cause of our financial problems.
The biggest problem is that we live in a world of plastic and for all practical purposes we do not respect or understand the value of cash.
If you follow this simple but different principle of Cash is King you will start on the road to financial peace of mind. Here are two basic suggestions on how to follow the principle of Cash is King:
When you are paid make sure you allocate enough money to pay your rent/mortgage, utilities and any other fixed expenses you may have. Any amount of cash that is left should be withdrawn from your checking account to be used for food, clothing, gifts, entertainment, gas, etc. The best way for you to control this cash would be for you to divide and allocate certain amounts of cash for each variable expense and store this cash in labeled envelopes, like the envelopes found in the BUDGETkeeper SYSTEM.
Now remember that this cash is the only way you can spend. Once you have used all your cash there will be no spending until your next paycheck. This is tough! No credit/debit cards? You must be kidding! How will I ever get through to my next payday without using my credit/debit cards? They say smoking is hard to give up, I think sticking to the principle of Cash is King may even be harder!
Stick with Cash is King and manage your money. You will start by finding the cheapest places to buy gas, run your errands more logically and take your morning coffee from home instead of buying that latte every day. You will have to find many new ways to manage your cash and the first few weeks will be the toughest. You may even run out of cash before your next payday, however, you will stick to the principle Cash is King and eventually find financial peace of mind.
After several weeks it will get easier to manage your cash and you will be surprised to find extra cash available before your next paycheck. What will you do with that extra cash? Many say put the extra cash into a savings account or pay a little extra towards one of your debts. I say put it in a coffee can and let it accumulate then take yourself out and have one great party!
If you can follow this principle, you will be on your way to establishing a personal/family budget. Let the BUDGETkeeper SYSTEM show you the way to financial peace of mind.
Credit counseling or debt settlement? While naturally Franklin Debt Relief is inclined to argue on behalf of debt settlement over credit counseling, we also recognize that its impossible to declare which program is better because it depends on a number of variables that differ from individual to individual. The purpose of this article is break down which factors you should consider before choosing the appropriate option.
1.What can you afford? Credit counseling programs tend to be a lot more expensive than debt settlement programs. The reason is simple: credit counseling only produces results on the interest rates, whereas debt settlement is able to actually negotiate the amount you owe. Simply put, if you are in a true financial bind, then the clear choice for you should be debt settlement, and on a pure money saved basis, debt settlement will almost always be the answer. Although this is undoubtedly an important factor, it is not the only variable to consider before making a decision on which program is best for you.
2.What sort of credit impact can you tolerate? Some credit counselors out there will undoubtedly tout that their program doesnt affect your credit score negatively. This is a play on words. Sure, your score wont drop, but ask any lender what the impact is to your loan application. Let me save you some time—its devastating. That being said, debt settlement is no better for your credit, and lenders in general definitely do not like seeing debtors seeking outside help for their financial situation. On the flip side, they definitely do not like seeing the past due marks from enrolling in a settlement program. So lets consider this example: Four years ago, John decided to use credit counseling, and Mary decided to follow the debt settlement path. They both have the same income and expenses, and they both apply for a $200,000 mortgage. Who is more likely to get it—John, who is 1 year away from completing his credit counseling program, or Mary, who finished her debt settlement program 1 year and half ago and has since been rebuilding her credit? While this may vary from lender to lender, in general Mary would be considered the better loan applicant. What if John paid a lot per month and they both finished their respective programs in the same amount of time? By itself, the credit counseling program would be better for your credit, but when you factor in the fact that Mary would probably have more savings to contribute to a down payment, shed still probably be considered the better loan applicant. Do I think this is fair? Not at all. Its ridiculous that lenders are so harsh on clients of credit counseling programs. Unfortunately, the system is flawed, but until there are adjustments made to correct it, debt settlement clients will be in a more favorable position to obtain new credit upon completion of their program.
3.Who do you owe? So you can save more money in debt settlement, but not always. If you owe a more aggressive creditor like Citibank, then its possible that credit counseling or bankruptcy may be a better option for you. The reason: Citibank not only tends to settle for more on average, but they are also more likely to pursue legal action to collect a debt. Although under most circumstances debt settlement is still successful with these creditors, it is a much riskier undertaking when youre dealing with Citibank. If you cannot afford credit counseling and your debt is exclusively with Citibank, then unfortunately youre probably better off filing bankruptcy.
4. What is your personality type? Ive read just about every article online regarding credit counseling versus debt settlement, and Im amazed by how most finance authors eliminate the human element from this discussion. The bottom line: debt settlement is not for the faint-hearted. There is no guarantee that everything will work out completely as planned. Some settlements may be higher than estimated. Some settlements may be lower than estimated. You will inevitably get some creditor calls. This is the nature of the program, and you must be willing to accept some level of uncertainty before enrolling.
I organized the following 4 questions in this order on purpose. After all, if you cant afford credit counseling, then its pretty much out of the picture as an option for you anyway. I dont mean to sound overly cynical, but we live in a material world and issues like having an anxious personality must be sacrificed when you dont have the money necessary to freely exercise this aspect of your character. On the flip side, if you have 100% Citibank debt, it would be foolish for you to choose debt settlement over credit counseling or bankruptcy just because you fancy yourself a risk-taker.
There are countless other variables that influence whether debt settlement or credit counseling is appropriate for you (i.e. what state you live in, your income source, etc.). Your best bet is to discuss your individual situation with someone knowledgeable in these arenas.
Most people, even those without debt, have a hard time saving money.
The plain truth is that most people will spend all of their money every month. They grow to become used to this spending level. It is very, very difficult not to do this.
Financial advisors say it over and over again — you have to pay yourself first. It is the truth. Those of you with 401(k)s don’t miss that money being automatically taken out of your paycheck. You never see it, so you don’t miss it. That is the idea of paying yourself first. If possible, have your employer deposit a portion of your paycheck each month into your savings account. Or perhaps your bank will automatically withdraw that amount from your checking to your savings each month. You never see the money and you don’t have to make any effort to save. It is perfect.
If you pay yourself first, you won’t have a chance to spend the money. When you sit down to write bills out, don’t pay the mortgage first. Pay your savings and then pay your bills. See, most people pay their mortgage, cars and other loans first. Then they pay the electric and water. Then they pay what they can on their credit cards. Whatever is left over is spent on living, gas and food.
Then there is nothing left to save. If you wait to pay your savings last, you probably won’t pay it. You must pay yourself first. Write a check to your savings first, then pay the bills.
We lose a lot of money in just pennies each month. One of the best ways that my husband and I save money is to never spend our change. In fact, every night we dump out our wallets. Anything less than a ten goes in the money jar. It is surprising how in just a month, that money really accumulates. We’ve used the money like a small emergency fund. We grocery shop on it when money is tight or we treat ourselves to a nice evening out. It is an easy way to save.
Another version of this is to put the change you get back from any drive-in in an envelope in your glove box. Do this whether the change is one dollar or ten dollars. When you clean out your vehicle, you will be surprised at how much has accumulated. In fact, it could buy you a tank of gas every once in a while.
When you spend, you can save money as well. Purchase items that grow in value. Extra money lying around? Invest it in the stock market. Invest it in paying off your mortgage early. Use it in ways that make you money. Pay off your debts and invest the rest.
When you save money, the key is to really save it. If you buy something on sale, what happens to the money you saved? You probably spent it on something else. Nothing really went into savings. From now on, when you save $15 on groceries, put that $15 in your savings account. When you don’t buy a new sweater because you know you need to save, put the cost of that sweater into your savings.
Saving money isn’t that hard. It is simply a habit that has to be learned. Experts say it takes two weeks to make an action a habit. So start today, in two weeks it will be easy.