STEP #1 - Appreciate all of the things you have
STEP #2 - Realize that you "need" very little
STEP #3 - If you're on a payment plan, you can't afford it (exception - mortgage)
Check them out here. Okay, let's move on!
STEP #4 - Make a list of your debt. It should be real, and it should be scary.
Debt is relatively easy to forget about. Most people don't walk around stressing about the balance on their car loan or student loan or even their Old Navy credit card. But I would challenge you to make your debt visible. Make a list on your refrigerator of who you owe, how much, and the interest rate. Pay the minimum on all of them, except the one with the highest interest rate, and throw all of your extra money at that one. SAVOR crossing them off as you pay them off. No extra money to throw at debt, you say? On to number five.
STEP #5 - Create a budget. And follow it.
Budgets scare people. I'm not sure why. You're spending money whether you keep track of it or not. Right? There are four gazillion tools out there for budgeting. I love (love, love, love) www.mint.com It's amazing. Do it. Right now. Or, there's Google doc templates for budgets and tons of other resources. Get something down on paper. Start with charitable giving and your monthly bills that can't change (electric, water, sewer. debts). Then start throwing other bills and expenses in there. As you add an item to your budget, challenge it. I switch auto insurance companies (or at least compare) every 6 month pay period. I just switched from Allstate to Progressive, and I switch my homeowners insurance to get the discount as well. You all know about our agonizing sacrifice of smart phones, but now we have $70 freed up each month. And please stop saying, "But I work so hard, I deserve it." or "Even that lady on welfare has an iPhone!" Um, why are you trying to compete with a lady on welfare? If she's on welfare and has an iPhone, she's obviously not a financial wizard or someone to benchmark your budget on. Anyway, as you add each item to your list, assess it's usefulness versus cost and try to cut. At the end, you should have money left. This is your money to pay off debt. Not to go on a cruise. Not to go to the movies. To pay for things you already have, but have not yet paid for. Does this suck? Yes, very much. But you're the one who had to have that iPad.
STEP #6 - Invest your money, beyond your savings account.
My savings account has the minimum $5 in it. Pretty much always. That's because savings accounts are kind of the greatest sham ever. How much interest do you make on your savings account? I bet you don't know. I make 0.15% on money in my savings account. So if I keep $1,000 in my savings account for a year, I earn $1.50. Hence why it is empty. I keep my liquid money (that might need to be spent, transferred, etc. in a relatively short time frame) in my credit union (always better than a bank) checking account. Any "savings" I put into an relatively liquid investment account. I use a Cat Power Account. It's return rate is almost 10x a credit union savings account, with no management fees. And here's the kicker... free checks...BUT... they are invalid if written for less than $250. So that helps keep their use to emergencies, as I have intended. When I stumble across a large pile of money (or get a tax refund) and my emergency fund is well stocked, I invest. I'm not a pro at this, but mutual funds are always good. Sites like Fidelity and the like are pretty good/easy. I also have a 401K that I contribute to regularly and a 429 college fund started for Blakely.
So here are the next three steps on living rich! Go forth and prosper.
No comments:
Post a Comment