We all want to get out of debt but it can seem like a long and hard road to financial freedom. In reality, it is not difficult as long as you follow a few steps and remain dedicated to the cause. This is a list of ten tips to help you find your financial freedom.
10. Face Facts
Before you go any further, you need to sit down and work out exactly what you owe, to whom you owe it, and what interest rate you are paying. This information will be very helpful with the rest of these tips. It is very easy to think of all of our debts as small payments each pay, but when you add them all up they can amount to a massive debt. This can be a very scary task but unfortunately it must be done. If you need to, get a friend or family member to sit down with you to help you go through old bank statements to make sure you miss nothing out. The good news is that once you have done this, the hard part is over. You have faced the debt and now it is time to kill it.
9. Stop Spending
Be satisfied with what you have. For the next few months you are not going to be able to spend money on treats. It is very important to be able to resist all of those wonderful things that we all want to have. If you are always wanting to buy new things, you are going to find it very hard to stick to the tips in this list and that can lead to failure and, even worse, more debt, unless you can start being satisfied with what you have. Chances are, shopping is what got you in to this predicament in the first place, so nip it in the bud now. You absolutely must stop acquiring new debt.
8. Increase Your Income
While this is not always possible, you should certainly try to increase your income (even if by only a small amount). The more money you have to put on debt, the faster you will eradicate it. You can take a part time job at a supermarket, at a fast food restaurant, or even just offering to do odd jobs around the neighbourhood. There are a huge variety of part time jobs available in all manner of areas.
7. Pay Yourself
It is very important that you give yourself enough money to spend each pay cycle. If you try to skimp in this area, you will break your budget and undo all of the good work you have achieved. This is not to say that you should not be trying to reduce expenses, which is also very important. When working out your “play” money, be sure to include everything you might normally spend money on. If you leave something off you can put the whole budget out of whack.
6. Stop Saving
Until you are out of debt, stop saving. In fact, if you have savings put aside, you should immediately transfer the full amount on to your debts. Your savings account will be making you far less interest than the money you will save by reducing debt at high interest. Here is a very basic example:
Savings @ 5% : £10,000 (Total interest earned in one year: £500)
Credit Card @ 21% : £10,000 (total cost of debt for one year: £2,100)
By putting your £10,000 on to your debt, you are saving £2,100 in interest charges at the expense of £500. It would be utterly foolish to leave your money in the savings account.
5. Consolidation Loans
Unless you have managed to get so deeply into debt that you can’t make minimum payments on all of your loans and cards, you should definitely not get a consolidation loan. If you are in such a bad state that you simply can’t afford your debts, a consolidation loan may be the only choice you have short of bankruptcy. Make sure you shop around and get the lowest rate possible. You should also try to keep the term down as it will become a part of your debt budget and you want to clear your debts as soon as possible.
4. Reduce Expenses
Frugal living can be very rewarding. Not only do you save money, but you learn a lot about survival and taking care of yourself. There are some very simple ways you can reduce expenses. For example, perhaps you go out on the town twice a week – reduce it to one night and have the other night in – you can still enjoy yourself but you won’t be paying bar prices for liquor. If you always buy brand goods at the market, start buying generic – you can save a lot of money doing this. You should also consider buying in bulk as bulk buying is almost always cheaper. Keep your eyes out for good deals and coupons. While this may seem like a difficult step, you will eventually find that you prefer to live like this because of the many rewards that come from exercising your brain in seeking out ways to reduce spending. A very beneficial side-effect to this (which I have personally experienced) is that you can dramatically reduce the amount of trash you produce by buying only what you need and buying in bulk. This can be looked at like a game. When I was following this plan, I found myself trying every week to reduce the amount of money I was spending. The less I spent, the better I lived (as a result of home cooking and pride in my efforts). Do not buy pre-packaged or prepared meals – you are paying a lot of money for nothing. You should also be aware that certain meats, like chicken, can go up in price dramatically when you buy skinned and boneless. It does not take much time to do this yourself.
3. Credit Cards
Credit cards can be as good a tool to get out of debt as they were to get you into debt in the first place. If you have a credit card with a low interest rate that is not maxed out, consider moving a higher interest debt (or as much of it as you can) to the card. The interest savings may seem low, but every penny counts. If you have maxed your cards out, the first thing you need to do is cut them up. You will not be using credit cards on this plan (and if you absolutely need one for important internet purchases, get a pre-paid credit card).
2. Budget
First of all, this budget will include all of your income and all of your expenses, but, it will not include any of your debts – they will go on your special debt budget. In this budget you should list your total income, your total outgoings, and your total surplus. As a part of this budget you should also include your required spending money. It is imperative that you stick to this budget – it is your lifeline. If you are not honest when creating it, you will find the whole thing collapses within one or two pay cycles. Include every expense.
1. Make a Debt Budget
This is different from your regular budget. Your regular budget will tell you how much money you have left after all other expenses have been paid, the debt budget will tell you what you owe and how much to pay on each debt. Transfer the total surplus from your budget to the debt budget. This is the most important money you have – it is the money that will give you financial freedom. Next you need to itemize all of your debts in order of highest interest paid to lowest interest paid. Pay the minimum amount required on all but the highest interest debt – this is the only time you should be paying minimum payments. Keep doing this until you remove the high interest debt entirely. Once this is done, put 100% of the money you were spending on that debt to the debt with the next highest interest; keep doing this until you have paid all of your debts off. This creates a snowball effect and you will be amazed at how quickly your debt is reduced. It is one of the best motivators for people working on debt reduction. You should remember to do this in conjunction with no.3 (transfer highest interest debts to lowest interest debts where possible).
Once you have paid all of your debts off, start putting the full amount of your debt payment money into savings and investments. You were already living without the money – why not keep doing so and save it for something special.
Showing posts with label financial success. Show all posts
Showing posts with label financial success. Show all posts
Five Tips to Help You Build Your Wealth
1) Own your own home
Home ownership helps you build wealth in at least two ways. First, real estate is an asset with a healthy long term track record. Second, mortgage payments usually help you build equity and are therefore a form of forced savings.
2) Set goals, prioritize and focus
I figured out in the first year of my relationship that if you set goals, prioritize and focus your financial goals are far more likely to be achieved. I’ll repeat this. If you set goals, prioritize and focus, you WILL achieve your financial goals.
3) Invest in stocks
Over the long run, owners come out ahead under our system of democratic capitalism. To get maximum return on your money, you have to have some exposure to common stocks. Why? Making money on the appreciation and on the dividends will help improve your bottom line.
4) Don’t spend more than you earn
This is a no-brainer. If you have £100, but rack up debts of £500 on your credit card, then you’re in the red. Doing this over the long term is a recipe for bankruptcy. But if you got £100 and only spend £80, then your bank account is healthy and you’ll be happier, more in control if your life and better prepared to take whatever financial challenges come at you.
5) Pay off high interest debt
Usury sucks. Many credit card companies are usurious and attempt to engineer you into an agreement whereby your borrowing terms are stacked in favor of credit card companies. Other lenders like payday loan companies do essentially the same thing. In some of the arrangements, the borrower will be forced to pay upwards of 200% or 300% interest on their loans. If you’ve got high interest credit card debt or payday loans, pay them off immediately. Bite the bullet, sell some stuff, beg, do what you have to, but pay these types of obligations off immediately.
Home ownership helps you build wealth in at least two ways. First, real estate is an asset with a healthy long term track record. Second, mortgage payments usually help you build equity and are therefore a form of forced savings.
2) Set goals, prioritize and focus
I figured out in the first year of my relationship that if you set goals, prioritize and focus your financial goals are far more likely to be achieved. I’ll repeat this. If you set goals, prioritize and focus, you WILL achieve your financial goals.
3) Invest in stocks
Over the long run, owners come out ahead under our system of democratic capitalism. To get maximum return on your money, you have to have some exposure to common stocks. Why? Making money on the appreciation and on the dividends will help improve your bottom line.
4) Don’t spend more than you earn
This is a no-brainer. If you have £100, but rack up debts of £500 on your credit card, then you’re in the red. Doing this over the long term is a recipe for bankruptcy. But if you got £100 and only spend £80, then your bank account is healthy and you’ll be happier, more in control if your life and better prepared to take whatever financial challenges come at you.
5) Pay off high interest debt
Usury sucks. Many credit card companies are usurious and attempt to engineer you into an agreement whereby your borrowing terms are stacked in favor of credit card companies. Other lenders like payday loan companies do essentially the same thing. In some of the arrangements, the borrower will be forced to pay upwards of 200% or 300% interest on their loans. If you’ve got high interest credit card debt or payday loans, pay them off immediately. Bite the bullet, sell some stuff, beg, do what you have to, but pay these types of obligations off immediately.
6 Tips for Simple and Successful Marital Finances
I think we can all agree that finances play a key role in our married lives. It’s the need to provide a quality life for our family that drives most of us to work, and we know that the way we spend our resources directly affects our lifestyle now and down the road.
Money stuff is important.
That is not to say that money is the center of life or that managing the family finances must be an oppressive burden. In fact, financial success is really just a matter of making good choices consistently.
The number 1 rule is to keep it simple.
These tips aren't earth-shattering and they're not original. In fact, it is the same advice we have heard from our grandmothers our entire lives. It’s not complicated, but it's effective.
6 Tips for Simple and Successful Marital Finances
1. Build a basic budget…together
The two key components of a meaningful family budget are: (1) to proactively plan ahead for how you will spend your money and (2) to create it with your spouse.
You and your spouse must create your budget together and you must agree to follow the same budget. When you take this approach, a budget can become a surprisingly valuable tool in your marriage. Real communication is needed to formulate a plan, and real trust is developed when you both stick to it out of respect for each other.
2. Work together from a single account
Do you and your spouse operate with separate bank accounts or a “yours, mine and ours” approach to your family finances? I would strongly encourage you to consider simplifying your life by consolidating everything into a single bank account. Not only will it be easier to keep track of, but you will benefit by shifting your mindset to one of unity with your money. As a bonus, you can expect that the openness and communication required to make a single account a success will carry over and enhance other aspects of your married life.
3. Eliminate your debt (very important)
None of us enjoy paying the car finance company or student loan office each month. In fact, I think we can all agree that it sucks to have your hard earned money spoken for before you even receive your salary. So, if we all hate the payments, why do so many families have them?
It’s a matter of mindset. If you are fed up with being normal (i.e., deeply in debt), you can shed the debt and achieve financial freedom. You set the priorities, and you make the decisions that will allow you to ditch the debt. My wife and I only have a mortgage as debt - our credit cards are paid off each month and we don't borrow a single penny for expenditure, and you know what? It's absolute bliss.
4. Stick with simple (and effective) investments
As a rule, if you don’t fully understand something, you should not invest in it. If you chase the latest hot trend and buy what everyone is recommending, you are almost assuring yourself of poor returns.
Instead, take a simple approach and focus your investing in areas with a long track record of success. Personally, I think it is tough to beat a diversified mix of mutual funds for retirement investing. They are not sexy or flashy. But they are very effective, low in cost and easy to understand. That’s a formula for long-term success. There are even no fee mutual funds on the market now that have given consistent and reliable returns - but don't forget to take advantage of your Share ISA to reduce your taxes.
5. Enjoy the simple things in life. Live within your means
At the end of the day, it really does come back to living on less than you make. I hope you make a lot of money and love what you do to earn it. However, the critical point here is that you really don’t need a ton of money to be financially successful.
The key is contentment. Quit placing your value in material things and trying to maintain a high-cost lifestyle. When you learn to appreciate your family and value the simple pleasures in life, your need to impress the neighbors really does start to fade.
6. Remember to pass it on
In my opinion, the best part of simplifying your financial life and finding contentment with your lifestyle is the impact it has on your relationship with your spouse and the example it sets for your kids. When you break the cycle of debt dependence and fights about money, you set the stage for financial success for generations to come. You literally have the ability to change the future shape of your family tree.
Were these suggestions brilliant, original and completely unexpected? Of course not. I’d venture to guess that you knew these things, but you may not be living them. The key is to take action.
Simplify your financial life and invite new success with your money and, most importantly, your marriage.
Money stuff is important.
That is not to say that money is the center of life or that managing the family finances must be an oppressive burden. In fact, financial success is really just a matter of making good choices consistently.
The number 1 rule is to keep it simple.
These tips aren't earth-shattering and they're not original. In fact, it is the same advice we have heard from our grandmothers our entire lives. It’s not complicated, but it's effective.
6 Tips for Simple and Successful Marital Finances
The two key components of a meaningful family budget are: (1) to proactively plan ahead for how you will spend your money and (2) to create it with your spouse.
You and your spouse must create your budget together and you must agree to follow the same budget. When you take this approach, a budget can become a surprisingly valuable tool in your marriage. Real communication is needed to formulate a plan, and real trust is developed when you both stick to it out of respect for each other.
2. Work together from a single account
Do you and your spouse operate with separate bank accounts or a “yours, mine and ours” approach to your family finances? I would strongly encourage you to consider simplifying your life by consolidating everything into a single bank account. Not only will it be easier to keep track of, but you will benefit by shifting your mindset to one of unity with your money. As a bonus, you can expect that the openness and communication required to make a single account a success will carry over and enhance other aspects of your married life.
3. Eliminate your debt (very important)
None of us enjoy paying the car finance company or student loan office each month. In fact, I think we can all agree that it sucks to have your hard earned money spoken for before you even receive your salary. So, if we all hate the payments, why do so many families have them?
It’s a matter of mindset. If you are fed up with being normal (i.e., deeply in debt), you can shed the debt and achieve financial freedom. You set the priorities, and you make the decisions that will allow you to ditch the debt. My wife and I only have a mortgage as debt - our credit cards are paid off each month and we don't borrow a single penny for expenditure, and you know what? It's absolute bliss.
4. Stick with simple (and effective) investments
As a rule, if you don’t fully understand something, you should not invest in it. If you chase the latest hot trend and buy what everyone is recommending, you are almost assuring yourself of poor returns.
Instead, take a simple approach and focus your investing in areas with a long track record of success. Personally, I think it is tough to beat a diversified mix of mutual funds for retirement investing. They are not sexy or flashy. But they are very effective, low in cost and easy to understand. That’s a formula for long-term success. There are even no fee mutual funds on the market now that have given consistent and reliable returns - but don't forget to take advantage of your Share ISA to reduce your taxes.
5. Enjoy the simple things in life. Live within your means
At the end of the day, it really does come back to living on less than you make. I hope you make a lot of money and love what you do to earn it. However, the critical point here is that you really don’t need a ton of money to be financially successful.
The key is contentment. Quit placing your value in material things and trying to maintain a high-cost lifestyle. When you learn to appreciate your family and value the simple pleasures in life, your need to impress the neighbors really does start to fade.
6. Remember to pass it on
In my opinion, the best part of simplifying your financial life and finding contentment with your lifestyle is the impact it has on your relationship with your spouse and the example it sets for your kids. When you break the cycle of debt dependence and fights about money, you set the stage for financial success for generations to come. You literally have the ability to change the future shape of your family tree.
Were these suggestions brilliant, original and completely unexpected? Of course not. I’d venture to guess that you knew these things, but you may not be living them. The key is to take action.
Simplify your financial life and invite new success with your money and, most importantly, your marriage.
Subscribe to:
Posts (Atom)