A Path To Financial Freedom!!
Fix Your Finances
Getting A Handle On Your Finances!!
Over the years I've been asked on more than one occasion how to get out of debt. Well, I figure this is as good as time as any to show you a method of debt consolidation. Now most people will either hire someone who will tell them to cut their credit cards and stop spending. Having gotten myself out of $20,000 worth of debt and having helped people who have had more than $10,000-$30,000 worth of debt to finally be debt free, I feel an obligation for me to at least try to help you navigate your finances and eliminate your primary enemy, your debt.
First things first you have to have income, I can't stress this enough. If you don't have a job, get one I don't care if you have to work at a fast food restaurant go get a job. If you have a job it's time for you to start looking at your spending. What are your expenses? If you don't know what you're spending money on how can you ever think that you will ever fully get out of debt. Imagine trying to swim from one side of a lake to the other, and having to do that in the fog in the middle of the night. Let's not forget that you have no lights and it's pitch black outside because there is no moon out. Can you imagine being in the middle of that lake? Losing sense of what side you're swimming to and not realizing that you're swimming in circles. You know what can happen next right? That's right! You're gonna drown.
That's how most of us handle our finances, we are simply swimming in circles and drowning in debt. So let's get an action plan that you can use to get out of debt. First thing I need you to understand is that this is not going to be fast but it's going to be steady.
1. Have a source of income
I already talked about this but I just want to reiterate if you don't have a job get one. Nothing else I tell you will help unless you have a source of income to work with. If you have income coming to you from a home-based business or you're self-employed that's fine as long as you have an income.
2. Pay yourself first
Some people will say "I do pay myself first" but if that was true
you would actually have money and not be in debt! Simple as that. When
I say pay yourself first, what you have to do is take 10% of your
income and save it. Don't touch it, don't spend it or find any other
uses for it. This is the money you've earned and we're not going to
touch that at all. What you're going to realize is that once you pay
yourself that first 10% you're not going to miss it. You owe it to
yourself to take this first step.
3. Automate your way to freedom
I don't believe in budgets and no one that I've helped get out of debt has ever heard me say anything about a budget ever. I don't believe budgets work, what I do believe in is the "set it, and forget it" formula for finances. Use your bank account and set up automatic bill pay so this way your bills get paid and you don't even have to think about it. But do not use the account that you have your 10% in, to pay bills. That should be a separate account and will eliminate you making a mistake and paying a bill from your own saved earnings. Remember we're not touching that!
4. Find the hole in your pocket
This is very crucial in ridding yourself of your financial burdens. Everyone and I do mean everyone has some type of hole in their pocket where money is just leaking out onto the street. Our job is to find the hole, sew it up, and prevent any new holes from forming. So what are your holes? For me, it used to be cigarettes I used to spend six dollars every 3 days on a pack of clove cigarettes. So let's do the math for that.
$6 times 2 packs of cigarettes a week equals $12 a week or $48 a month or $576 a year or $5760 lost in 10 years just from smoking. Imagine if I smoked for 50 years, I would've lost $28,800 just from smoking cigarettes.
I know some of you are saying "I don't smoke!" Okay, do you eat out? Do you eat fast food? Do the same math and you'll find that you may end up spending more than just a smoker, especially if your meals end up being five dollars and you eat (lunch and dinner) or (breakfast and lunch) at a fast food restaurant. Then you looking at $10 a day if you eat two meals out. But you know what? Let's just do one meal out five days a week which will include Monday through Friday which is the typical work week.
$5 times 5 days a week eating out equals $25 a week or $100 a month or $1200 a year or $12,000 lost just from eating out for 10 years. Again, imagine if you ate out for 50 years, that's a loss of $60,000. If you did eat two meals a day that would be $120,000 gone!
Now do you see how everything adds up? Look at all the little things that you buy. A pack of gum here, a bottle of soda there, supersized meal, extra cheese on that burger, new pairs shoes when you have 500 in your closet. Everything adds up so it's up to us to find those holes in our pockets and sew them up for a little bit. Your goal right now is to get out of debt and learn how to use money more effectively.
Another thing that we have to talk about is shopping. I'm not talking about your shoe habit, or your insatiable need for jewelry or trinkets, all of which all liabilities.*Grin* No, I'm talking about food shopping. Stop shopping every week! If you must, shop every two weeks. I've helped people to save an extra $200-$500 every month, just by reducing the amount of trips a person or family takes to their favorite supermarket. Yes even to Wal-Mart! The more times you go to the supermarket are the more opportunities you're going to spend money on things you may or may not need.
When you do go to the store make sure to carry a list with you. Stick to the list! No I mean it! If you forget to write something down on your list, when you get to the store and you remember you need it, you are not allowed to buy it!! This will train you to write down everything you need before going to the store, and keep you from buying impulse items.
5. Assets and liabilities
Assets simply put, are things that put money into your pocket. Liabilities are things that take money out of your pocket. Do not confuse a liability being an asset! Your home is a liability unless you work out of your home and earn income from your home. The only time your home is truly an asset is the day you sell it and you make more on the sale of the house, than you spent on it. I don't know how many families I've met that tell me their home is their greatest asset, and I have to shatter the dream by telling them that their house is actually nothing more than a liability disguised as an asset. I can't take the credit for teaching you this I learned that from a mentor Robert Kiyosaki. You need to read his book Rich dad poor dad and you'll understand exactly what I'm telling you. Your goal in life is to gain assets and to limit liabilities. I have turned every house I've lived in into an asset not because I sell the home because mostly I rent, but because I work out of my home. So every time you pick up your credit card or debit card to spend money ask yourself am I buying an asset or liability if you can train yourself to do that, I assure you, you'll be out of debt faster than the average American paying for debt consolidation services.
6. Crunch that card
Now it's time to look at your credit cards, it's time to crunch your numbers and find a way to get you out of your credit card rat race. The first thing you wanna look at is the credit card that has the highest APR on it. This is the card we want to attack first and it should get the most of your money going towards it. Some people just don't realize how much APR can keep you running in circles especially if you're paying just the minimum. The reason why you want to attack the card with the highest APR is because that extra money that you get for paying that card off, can start a snowball effect for the rest of the cards that you have balances on, or any other debt that you've accrued. So if you have a card with 10% on it and another one with 20%, and maybe one with 5%. Go after the 20% card first then the 10%, then the 5% card. People want to make credit card reduction complicated when it's really simple the extra money that you save on understanding liabilities and watching your spending habits can now be used to help pay off your credit cards. I've seen people using these simple steps reduce $12,000 worth of debt in less than three years that's a tremendous reduction from just a few small changes in your lifestyle.
Now you see we haven't touched your 10% at all and I've helped you find money elsewhere so that we wouldn't even need it for bills. I'll show you in another article how to use those earnings to create more assets at a later date.
Now of course I can go on and on and list more and more steps, but I'll save that for another article. What I want you to do is start practicing the simple six steps and free yourself from the hole that unknowingly you dug yourself into but thankfully you can dig yourself out of.
Stay strong, stay blessed and stay focused
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