Money is one of those things placed in our lives, for better or worse. Unfortunately, money is a hard taskmaster because it promises more than it can give. Money gives you choices, but not the wisdom to make them. Money gives you options, but not the character to choose them. Money can provide our basic needs or it can be the largest source of conflict in our lives.
We all realize that money puts us on the same playing field in life, but we can’t ignore the effect it has on our lives.
According to the Wall Street Journal, personal debt is at an all-time high and yet personal savings are at a 58-year low.
The National Bureau of Economic Research, the private body charged with determining the onset of a recession has indicated that the current recession began in December 2007.
The National Bureau of Economic Research formally defines a recession as three consecutive quarters of falling real gross domestic product. (An extended decline in general business activity and sales)
So,what can the average citizen do? Over 70% of all Americans are living pay check to paycheck. Many well-educated families are losing hope and going bankrupt. Couples have indicated that money matters are the #1 source of conflict in marriage. What we need is a common sense approach that works.
Let’s explore four practical principles that make up a Financial Compass to steer you through the economic maze we all find ourselves in.
Principle #1: Save Money.
What do we save for? Three basics essentials in priority order:
1. An emergency fund to cushion life’s traumas and unexpected events.
2. To provide for our basic needs
3. Build wealth by saving for long-term goals like retirement and home purchases.
Remember - It isn’t how much we save! The goal is to be consistent and save regularly over a life time.
Principle #2: Live on Less than You Make
In the consumer-oriented environment we live in, living on less than you make and learning to be content with what you have is difficult. It may sound “un-American” to limit our spending but we must learn to spend less if we want to experience financial peace.
Principle #3: Dump Debt
Who doesn’t want to eliminate the pressure of debt? Debt robs us of our ability to save while adding undue stress to our lives.
Financial stress can affect a man’s self-esteem because of the inability to meet family needs. Women respond differently. When they experience a financial crisis they can become fearful because their financial security has been stripped away. For most of us we didn’t get here quick and will likely be a slow walk back. Hang in there! You can eliminate debt from your life.
Here are six basic ways to eliminate debt:
1. Quit borrowing more money(including credit cards). You can never borrow your way out of debt.
2. Save money regularly--life continues to happen while dumping debt.
3. Accountability provides power to change stubborn habits.
4. Sell something to kick-start the process.
5. Work an extra job or develop a secondary income temporarily.
6. Use a debt-reduction plan. It is called a debt snowball. This plan will help to accelerate debt payback. It works by listing your debts from smallest to largest regardless of interest rates. Then you pay minimum payments against each debt except the smallest. You concentrate on accelerating the smallest until it is paid off, then roll that payment to the next smallest minimum payment until it is eliminated and so on.
Principle #4: Have a written Cash Flow Plan
This means learning to spend every dollar you make on paper before the month begins. That doesn’t mean recording transactions after the fact. It means choosing to spend money on purpose and only after careful thought.
Even with a budget, it is easy to give in to impulse buying. Habits die hard! You must keep your long-term financial goals in mind—balancing your present wants with future needs. We all have limited resources so we must set our priorities. By creating a budget and spending on paper we can establish priorities as new habits form. Remember, though, no one budgets perfectly. If we can learn to manage our money by these “common sense” principles, we will begin to experiencing peace and contentment. There are no easy solutions, only increased awareness and persistence as we apply these principles in our financial lives.
If you find that you need assistance in the process you should contact a local Financial Counselor, like Keystonefinancialconsulting.com
“Virtually any goal can be accomplished, but the desire for the goal is not nearly as important as what you are willing to give up to achieve the goal.” --Earl Nightingale
“The real measure of our wealth is how much we’d be worth if we lost all our money.” --J.H. Jowett
Enjoy the process!
Here at we have a desire to assist small businesses and individuals who are experiencing financial distress, and those who are ready to move beyond financial crisis into Financial Peace.
To assist you in your efforts, we provide a host of services and we look forward to partnering with you today!
Keystone Financial Consulting
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