Archive for January 2011

First Step in Debt Free Living – Controlling Your Spending

January 17, 2011

The first step to financial independence and debt free living is to control your spending.  We live in a consumer driven world that encourages the use of credit for every purchase.   As a result, Americans are burdened by excessive consumer debt.  A recent report by the Federal Reserve stated that Americans owe approximately 826 billion in revolving credit card debt.   The burden of this debt is overwhelming families and robbing them of their hopes and dreams for the future.

A roman author, Pubilius Syrus from the 1st century wrote this quote 2,000 years ago.   “Debt is the slavery of the free”   How much more true is this quote today? 

If you are ready to take control of your financial future you must start by taking control of your spending.  Here are some proven tips and ideas to that are easily implemented that can dramatically impact your personal finances.

Breakout Your Expenses – Pull out all of your credit card statements, bank statements,  etc. and breakout all of your expenses into specific categories.   Create a ledger and enter each individual expense into the appropriate category.  Review each expense to determine what is a regular monthly recurring living expense and what were discretionary purchases.    Then total each category for last month.  This first step will provide you with some interesting data on your spending habits.  It will also provide you ideas on where you can start reducing or eliminating unnecessary expenses.

Track Every Expense for 30 Days – This exercise is absolutely critical and it will provide you some great insights into your spending habits if you track every dollar you spend for 30 days.  Use the memo pad in your cell phone or keep a small notebook with you to write down each expense as it occurs.   Don’t see this exercise as a burden.  Have some fun with it.  Set up a ledger with different expense categories and enter all of your expenses at the end of every day.  Use the same ledger system to enter all of your normal payments on the 1st and 15th as well into their specific categories.  

Debt Free Living is Possible – What if you were debt free?  How would you live differently?   Debt free living can be a reality for anyone that is willing to commit to the goal.  I hope you will take some time as part of this exercise to stop and think about your life, your finances and your hopes, goals and dreams for your life.  Take the time to reflect on how your debt has impacted your life and your finances.  More importantly, take some time to declare some new goals for your life.  Goals based on being debt free.   Goals that will motivate you and inspire you to take action today to take control of your personal finances and change your life forever.   See my previous post Financial Literacy begins with – The Power of a Vision to Transform Your Life and Your Finances.

Accept the Challenge – I hope you will make the commitment to track your expenses for 30 days.  The exercise is truly valuable.  It will provide you new insights into where all of your money goes every month.  It will also provide you with some ideas and insights on how to reduce or eliminate unnecessary expenses.  This is the first step in taking control of your finances and moving closer to debt free living and achieving financial freedom.

Challenging Our Family –  I am going to take this challenge as well.  I will keep you updated on my progress, my breakthroughs and my insights.   This will be a great exercise for my wife and two teenagers.  We will make it a fun family challenge with a prize for achieving the goal of tracking every expense for our entire family for 30 days.  This is an excellent opportunity to share financial literacy lessons with our kids.

Quotes to Motivate and Inspire:

Empty pockets never held anyone back.  Only empty heads and empty hearts can do that”  Norman Vincent Peale

“A miser grows rich by seeming poor.  An extravagant man grows poor by seeming rich” William Shakespeare

“If you would like to be wealthy, think of saving as well as getting” Benjamin Franklin

“If you want to feel rich, just count the things you have that money can’t buy” Proverbs quote

“It is not how much you earn, but how much you save”  Anonymous

 

I hope you have benefited from this post on Financial Literacy.  If so, leave a comment.  In addition, please forward this to anyone you think might benefit from this short financial literacy lesson. 

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Begin 2011 with a Personal Budget

January 7, 2011

A personal budget is absolutely critical for anyone that is committed to taking control of their personal finances.  Why? Because a budget provides us the input we need to manage our income, track our expenses, improve our cash flow to payoff debt and start a savings plan.  A personal budget provides us a tool to work on achieving our financial goals.   It is the first step in taking control of our personal finances.

Therefore, the start of a new year is the perfect time to commit to creating and using a personal budget.   This does not have to be an overwhelming task.  There are countless free personal budget resources and free personal budget software resources online to help you get started.  Don’t get caught up in selecting the perfect budget format.  It is not that important.  What is important is capturing all of your income and expenses.  Pick something that is simple to use.  We use a simple budget worksheet in Excel. Here is a link to a Microsoft personal budget template that has over 3.4 million downloads.  http://bit.ly/gatAnx

It is also very important when creating a personal budget to capture all of your miscellaneous expenses that occur throughout the month.  The only way to accurately capture all of these expenses is to save every receipt for every dollar you spent for a minimum of 30 days.  This information  is essential to preparing an accurate monthly budget.  It will also provide you some great insights into where all of your money goes on a monthly basis.

Once you have completed an accurate monthly budget and have captured all of your expenses you can start looking for creative ways to reduce or eliminate unnecessary expenses and save money.  The monthly savings you create can be used to start paying off consumer debt and funding your savings goals.   

A personal budget is the first step in taking control of our personal finances, controlling our spending and achieving our financial goals for our lives.    Start today and change your life and finances forever.  

 I hope you have benefited from this post on Financial Literacy.  If so, leave a comment.  In addition, please forward this to anyone you think might benefit from this short financial literacy lesson. 

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Top 10 Financial Resolutions for 2011

January 4, 2011

The start of a New Year is always an opportunity for each of us to reflect on our lives, establish new goals and renew our commitment to improving our lives.   One of the most important areas of our lives is our personal finances.  Our personal finances impact every area of our lives.  Therefore, it is essential that we take control of our personal finances.  

Here are some ideas and proven financial concepts that can dramatically impact your personal life and finances.   I hope you will take the time to read through them.   More importantly, I hope you will take the time to implement some of these ideas into your own personal finances.  

10.   Commit Time Everyday to Improving Your Financial Literacy.  How much time will you spend on the internet and watching TV today, this week or this year?  How much time have you invested today, this week or this year improving your financial literacy?   What is more important?   There are countless free resources available on the subject of personal finances and improving your financial literacy.   Remember, we must take full responsibility for our own financial lives.  Simplify this task by working on one subject at a time.  Pick something basic like home budgets, etc. and get started today. Work on this with your spouse, family, friends etc.  Together you will learn more and encourage one another. 

9.    Simplify Your Life – Our worlds are becoming more complex with every passing day.  What is consuming your life, your money and your attention and distracting you from the real things in life that are truly important in your life?  What can you eliminate or give away that will cut your expenses, free up your mind and simplify your life? 

8.   Protect Your Credit  –  Your credit scores are a reflection of how you have handled your credit and the repayment of your debt.  Your credit score is also used by lenders and other institutions to evaluate your risk in a variety of areas.   Your credit score may be used in conjunction with securing employment, renting housing, obtaining auto insurance, etc.   Therefore, it is essential that you do everything possible to protect your credit score.  Since your credit score is a reflection of you it is essential that you take the necessary steps to prevent and protect yourself from identity theft.   

7.   Asset Protection – It is absolutely critical that you have a will or a trust to protect their assets and provide for your family.  You do not have to be wealthy in order to have a will or a trust.  If you own a home, car, IRA / retirement accounts, insurance policies, etc you need a will or a trust.  This is absolutely critical if you have minor children.   A will or a trust allows you to decide who will be the guardian for your kids, who will receive your assets, etc.  Do not risk leaving these critical decisions to be decided by a court appointed representative in probate. 

6.   Create Clear, Concise Financial Goals – This is one of the most important steps in achieving financial freedom.  It is our clearly stated goals that we have committed to writing that will compel us to take action to achieve financial freedom.  Without clearly stated goals we will abandon our financial commitments for the future and only think of our immediate wants and needs.  We cannot afford to waste our precious time, money and resources consuming our future by our lifestyle choices today.  Therefore, it is absolutely essential that you take some time and write out your vision and goals for your finances and life.   You want goals that will inspire you.  Goals that motivate you to achieve financial freedom and live the life you have always imagined living.  For more information on this subject see my previous post.

5.   Pay Yourself  First – This is not a suggestion, but a key fundamental rule for anyone that has achieved financial freedom.   Have you ever stopped to ask consider how hard you work for your money?  Who are you really working for the bank, the mortgage company, the credit card company?  Stop making someone else rich!  You must always pay yourself first.   Start saving today and learn how to put your money to work for you.

4.   Establish Cash Cushion   A cash cushion is an emergency fund that is created to cover your living expenses for 3-6 months.  It is also used to cover unforeseen expenses, repairs, etc. that come up in everyday life.  The purpose of a cash cushion is to keep you from incurring expenses on your credit card when emergencies arise.  A cash cushion will also provide you peace of mind that you have 3-6 months living expenses in the bank at any time.   I encourage you today to set up a separate bank account and start funding your cash cushion account.

3.   Stop Consuming Your Future – Control Your Spending   When was the last time you reconciled every dollar you spent for the last 30 days?   When was the last time you looked at every charge on your credit card statement?   I challenge you to track every expense for a minimum of 30 days to see where all the money goes every month.   Use this exercise to look for ways to reduce unnecessary expenses, save money, etc.  We live in a consumer driven world.  Our spending habits are consuming our future.  We must take control of our spending habits to start moving towards achieving financial freedom.

2.   Become Debt Free – Debt is consuming the lives of millions of people.   Debt is what keeps us from pursuing our hopes, goals and dreams for our lives.  Debt robs us of our future.  The only way we can take control of our financial lives and our future is by becoming debt free and never going back into debt.  Debt free living must become your passion and your unrelenting goal.  Debt free living can be a reality for anyone that is willing to commit to the goal.  What if you were debt free?  How would it change your life?  What could you do or pursue if you were debt free?

1.   Create & Live Within A Budget    A budget is absolutely critical for anyone that is committed to achieving financial freedom in their lives.  A budget provides us the input we need to manage our income and our expenses.  A budget provides us accountability. A budget provides us a tool to work on achieving our financial goals.  A budget will dramatically impact your personal finances.   It will provide you the roadmap to achieve your financial goals.

 I hope you have benefited from this post on Financial Literacy.  If so, leave a comment.  In addition, please forward this to anyone you think might benefit from this short financial literacy lesson. 

You can follow Fiscal Literacy on Twitter and Facebook.