Financial stresses can be overwhelming. The following steps and tips are intended to help you gain momentum in your fight for financial freedom. These steps and tips require time and are not intended to be a quick-fix. You must pay the price by putting in the energy, hard work and time. Unfortunately, no one is going to bail you out, nor should they.
1. Take care of your needs first (in this order).
a. Food – Always keep enough money to eat.
b. Shelter – Always pay your mortgage first. Save your house before saving your credit. If you do not, you will lose your shelter. (This is a secured loan.)
c. Utilities – Having lights on keeps up your moral.
d. Transportation – This includes gas, insurance and any loan payments (again, this is a secured loan)
e. Other loans and credit cards – These loans are typically unsecure. That’s why they will call and hound you in order to get their money. Some people make the mistake of using their mortgage payment to pay the credit cards’ payments as they mistakenly believe they are saving their credit.
2. Develop a battle plan; also called a BUDGET.
a. Pay everything on paper before the month starts.
b. Develop a zero balance budget sheet – which means at the end of the balance sheet it should equal zero. (Income minus expenses)
c. Any money left over should be applied towards the debt snowball (see step-5).
3. Get current on outstanding debts and stop digging a deeper hole.
a. STOP using credit cards, store cards and payday loans.
b. START using cash or debit card (money you already have).
c. Save for major purchases.
4. Develop a mini emergency account.
a. Save $1,000 – FAST.
b. This will become your safety net; emergencies will be handled by this account. (THIS IS NOT A SLUSH ACCOUNT.)
c. Most people get into trouble because they use their credit cards as an emergency account for things like house and car repairs, etc.
d. Do not begin the next step until this is account is fully funded.
5. Start the debt snowball.
a. List all the outstanding debts in ascending order from the lowest to highest balance (except for the mortgage; see step 9).
b. Pay the minimum balance due for all debts except the first one (which should be the lowest balance).
c. Any remaining money, found money, or bonus money needs to be applied toward paying this balance off.
d. Once that balance is paid off, do not celebrate yet. Apply all that money to the next balance on the list.
e. Continue this process until the debt is eliminated.
f. If you have an emergency, return to step 4 before continuing the debt snowball.
6. Fully fund the emergency account to cover 3 – 6 months of expenses.
7. Invest 15% of income in retirement and take advantage of any matching funds your organization may offer.
8. Save for kids’ college.
a. Remember your retirement needs to be funded first.
b. Your kid’s education will not pay for your retirement.
c. Or encourage your kids to join the military for the 100% tuition assistance program.
9. Pay off the house.
a. Paying the bank interest $ is not an adequate tax shelter.
b. donating to charity if you need a tax deduction.
10. Influence your family tree.
a. Educate your kids regarding money.
b. Enjoy your wealth and bless others with it.
c. Use my Job Card Parenting System to help. http://www.lulu.com/product/ebook/job-cards/18547493
Other tips for cash to fund your mini-emergency account:
1) Have a yard sell, sell on ebay and craigslist. 2) Sell your services, i.e. piano lessons, tutoring, woodworking, etc 3) Stop eating out, pack lunches. 4) Kill the cable TV, Internet and the home phone (if you have a cell phone). 5) If you typically get a tax refund, increase your exemptions. (Consult your CPA first.) 6) After you have a $1,000 emergency fund, consider increasing your insurance deductibles. 7) Use the Library for renting free DVD movies. 8) Read the book Put More Cash in Your Pocket by Loral Langemeir.
(Many of the above steps were modified from Dave Ramsey’s seven steps for financial peace.)