We find ourselves in a recession today and many individuals find themselves in a bind. Many have lost their jobs, others lost their savings. A lot of it could have been prevented if everyone would follow the 10 rules to finances. Whether you have any money or not, follow these rules and secure yourself a better future.
1. Take Action: Maybe this sounds silly, but it is the first step. If you don’t take the decision to get started, if you keep pushing it until tomorrow, then you will still be stuck exactly where you are today in 5 years from now. That decision is the most important step to getting yourself free from all the financial trouble you have put yourself into. Start with a simple budget; separate your income and expenses in categories to make your process simple.
2. Pay off your credit card debts: This includes all your high interest debts. This is the part of your debts that kill your revenues. It takes so much any from your income. You pay more in interest than you will ever make back in savings. For example, that credit card maxed at $10 000 at the minimum payment will take about 30 years to pay off and will in the end cost you roughly $85 000. If you have more than one high interest debt, pay them off one at a time. Choose the one with the lowest balance and pay that one off. Don’t ignore the other ones. Put the minimum payment permissible on your other debts until the one you concentrate on is paid off. Then transfer the payment you were doing on that debt onto the next one added to the minimum payment. You will be surprised how fast you can get rid of your unnecessary expenses.
3. Make the difference between want and need: Have you ever read a success story? All those people that have struggled to get to the top have not concentrated their expenses on luxuries. Those luxuries came later in life, when the revenues were much higher than the essential expenses. Today we are in a society of luxury now. We are convinced so much that we need the expensive car, the largest television, the best lawnmower. Luxuries can come after you have bought your necessities in life like food, rent, clothes and gotten rid of your unnecessary debts.
4. Live on less than you earn: This is where most people lose it. Credit is so easily accessible today. We tend to buy now and pay later. Learn to live on what you have first. You will see your revenues go up as you get that credit card debt go down. You will pay less in interest and that makes more money staying in your pockets. If you are at the point of buying a luxury, make sure you have the money first, and then pay for it cash. If your expenses are higher than your income, you must find a way to make your revenue go up until your expenses come back down. Sometimes we need to turn the television off more and work a little harder to make the income we need to pay off some of those expenses we have acquired. This is not a permanent solution. It is just to get yourself back on the right track, back in the positive cash flow.
5. Pay yourself first: This is very hard for a lot of people. This does not mean to go buy yourself some thing before you pay off your essential and non-essential debts. This means to put some money aside in a separate account every week, or every other week depending on your payday structure. Be consistent. You will be surprised how much a little adds up at the end of a year. Start with just 10 dollars per week. When you get expenses paid, you can increase this to a higher amount. That is the exact amount I started off at a while back. I was putting 40 dollars aside per month and gradually increased as debts went down or revenues went up. That is an important point there, when you get a raise, don’t go blow it off right away, you are used to that standard of living, put it aside for now.
6. Set financial goals: What kind of income would you like to have in 2 years from now? What about 5 years or 10 years? Forget about what you are making now. Take a sheet of paper and write down what you want in your future. Star with the furthest date. What would you like in 10 years from now, and then figure out what kind of income you will need to achieve to get that kind of living. Don’t despair; this exercise is not to discourage you, but rather to set a goal for your future. All goals are achievable if you follow the proper path to it.
7. Educate yourself: When I left school, I had enough with reading. And I set myself to not read anything else but the TV guide for the rest of my life. I found out that, as humans, we tend to forget stuff. I also found out that life evolves very fast. I could not keep up to the world just by sitting in front of a television. When I wanted to get out of deep debt, I had to learn how to do it. Not having food in the refrigerator was no longer an option. We learn really fast from our mistakes, but we learn much faster if we can prevent those mistakes because someone else showed us how to not make them again. There is much to say for learning in a book from a writer who as put his whole life’s wisdom into words. It is like getting a 40 year lesson in a few hours of reading. Someone told me once:” The lazier a man is, bigger television set, the wiser a man is the bigger the library”.
8. Save and invest what is yours: Be responsible for your own financial situation. Be responsible for your own future. You have been saving some money for some time now by paying yourself first. Now that you have accumulated some money with a bit of interest, invest it wisely. Make that money pay you back rather than use it to pay for luxuries. Once than money pays you back in that investment, you have created what is called passive income. That is income that keeps coming in without you having to work for it. When you create enough of that income to surpass your own salary, then you have plenty of choices you can make about your future. And also, you have mostly paid off all your debts by the time you get to this point in your life. This doesn’t have to be when you reach the age of 65. I know plenty of people who do not have to work for a living anymore and are much younger than 65. This also includes me.
9. Protect yourself and your finances: At this point, you have worked so hard to get rid of your debts and increase your income. Make sure you protect yourself. The best way to do that is making sure you have enough insurance in case something happens. This is to ensure your loved ones are not stuck with your unpaid debts, even your investment debts. All investments come with debts, but this is called good debt. All smart investors have that good debt. Protect yourself by educating yourself on your investments. Do not rely on any consultants for this. You take advice for consultants, but you make the decisions yourself. It is a proven fact that a consultant investment portfolio has the same average as any average person’s portfolio. Before you take someone’s advice on any investment, make sure their own portfolio is above average. You do not want to take advice from someone who won’t be doing much better than you. The only difference in your investment then would be his fees.
10. Donate to wealthy causes: Every respectable entrepreneur in this world donates his time or money to a worthy cause. A lot of time they donate both time and money. Give back to society. Not everyone is fortunate to receive great things in life. And lots of times just our presence and our time brings a great deals of help to people.