Financial House Cleaning
Life seems to constantly unravel to chaos. Some roll over and attempt to exist within the mess; they often do, but they seldom prosper. Others take up the banner of order and struggle against the unraveling; these tragic heroes manage to wrestle the beast and, more often than not, succeed (at least temporarily).
Those countless little successes- from coffee cup handles all turned the same way to made-up beds- are a source of profound satisfaction that make the unending battle worth the effort. Or if not worth it in itself, is at least better than the alternative: living in chaos.
The irony is that while organizing your closet according to type and color may satisfy an obsessive need, it does little on its own to improve your standard of living. It is one thing to have a tidy house, but to do something that truly moves us forward we must turn to a realm many of us leave to chance and chaos: our Financial House.
Gain a measure of control over your future by following these simple steps:
1) Have steady source of income.
Simple and effective. Find a job that you at least do not hate and do the best you can. Maximize your earning potential by seeking to advance your knowledge by gaining higher levels of productivity.
2) Know the Foundation and the Flow.
Be intimately aware of what you have, what you owe and how much money comes in and out. In short, create and stick to a budget. There are many, many examples online. Pick one that suits your income and spending habits, fill it out, and keep track of your money tides.
Or create your own, but you should have three separate documents- two for your Foundation (what you own and what you owe) and the one for the Flow (what comes in and what goes out). Each table should have the basic information on each entry including account numbers and contact information.
a) Lay out clearly your assets.
House, cars, campers, savings bonds, retirement plan, 56-inch flat screen tv, anything of value over $200.
b) Make a list of everything you owe.
Company, contact info, account number, interest rate, payoff amount, etc.
c) Your income on one side and your expenditures on the other.
Hopefully you end up with a positive number.
3) Find out your credit score.
The Fair Credit Reporting Act mandates that the consumer reporting companies (Equifax, Experian, and TradeUnion) must provide you with a free copy of your credit report once every 12 months. To get it, go to annualcreditreport.com or call 1-877-322-8228.
Check it for accuracy.
4) Cut up your credit cards.
Credit cards are 95% bad news. Keep one for emergencies and destroy the rest. That is, destroy the cards but keep the accounts open to boost your credit score.
For the one(s) you have left, investigate what they charge you.
Call them and negotiate for lower rates and fees- it never hurts to ask.
5) Reduce spending- be frugal
Ask yourself before every expenditure if what you are about to buy is a Need or a Want. If we are honest, most things fall into the first category.
There are also numerous little things we can do that can add up to big savings. From energy efficient light bulbs to cutting cable, hundreds of small steps eventually result in a significant reduction in what we spend. Visit the numerous websites on frugal living that populate the internet for more ideas than you could possibly implement.
Make a list of cuts you can live with and start marking them off.
Final note- While the above are all keys to your economic survival, the most important steps involve deciding to take control and then, most crucial, sticking with the plan you envisioned. It is so easy to fantasize about what you will do tomorrow, but that glorious tomorrow only comes from working towards it today.