Take Your Medicine
I’ve noticed something about this country… we have a serious health problem. My wife, Tara Rayburn http://www.thehealthyhabitcoach.com/blog is far more the expert on physical health than me so you need to read her blog for those solutions. But I’m not talking about that, I’m talking about our financial health and there is a startling parallel between physical and fiscal health. The problems are the same, and so are the solutions.
The reason most people have physical problems is bad habits. We eat what feels good at the moment, not necessarily what’s best for us. We don’t exercise/work out. We take medicines that suppress symptoms rather than cure them. And we eat poorly the way those around us do.
It is the same thing with money! We buy what we want when we want it. We don’t put our money to work. We suppress the symptoms of poor finances with credit cards and loans. And we learn finances from friends and family around us rather than from experts.
So, here are some very simple and powerful financially healthy habits and I guarantee, if you apply these you will become financially healthy! [And go to http://www.daveramsey.com. His programs are where I learned this, and helped me get out of debt and build real wealth.]
Here are 11 steps to financial health…
1. Stop spending more than you earn! Simple, right? Uh-uh. We buy what we WANT rather than what we can AFFORD. Right now STOP all unnecessary purchases. Necessary expenses are shelter, food, basic clothing, utilities and gas. Restaurants, movies, TV’s, shopping are NOT necessary.
2. Build an “Emergency Fund” of $1,000 in a simple savings account and don’t touch it. This is purely for emergencies, meaning the car broke down, the pipes ruptured, the kids need medicine, that’s it. And if you use it, build it back before continuing with the plan.
3. Get out of debt. List all your debts lowest to highest, pay the minimum on the all but the smallest debt, and attack the lowest debt with a vengeance! Pay it off. Now attack the next smallest debt with a vengeance. This may take years, but get out of debt!
4. Now, build your emergency fund to 3-6 months expenses.
5. Don’t get derailed with old habits and go BACK into debt. We’re told “buy now, pay later,” “90 days same as cash,” “no payments until 2013,” and crap like that. Do NOT do that. Tear up your credit cards. If you can’t afford it, you can’t have it. Period. Pay cash for your car, as well as everything else.
6. Now, let’s get rich! How? Shhh… ere’s the secret: Spend less than you make, invest the difference. Whoa! That’s hard, eh? Most of us learn finances from our friends and family. Most of them are broke. Can anyone see a problem here? Learn from experts, rich people, people who’ve started with nothing and built a fortune. Go to Dave Ramsey’s “Endorsed Local Provider” for a financial planner and invest in growth stock mutual funds.
7. Work from a budget. List your monthly income and expenses, and tell each dollar where it’s going, on paper before you spend it for real.
8. Quit being normal. Normal is broke. Normal is in debt. Be weird. Live below your means. It’s cool, in a weird way.
9. “Net worth” is simply all your assets minus all your debts, or your financial scorecard. Most people have a negative net worth. Most people will retire with a net worth of $250 – after an entire life of work, that’s it! That sucks. And so will retirement. You can do better. Build your net worth.
10. Give abundantly to others. All truly rich people understand that the biblical principle of tithing, giving 10% of their income to church or charity, is a spiritual truth for anyone. It’s the only place in the bible where God says, “Test me in this, …tithe and see if I don’t fill your storehouses.” When you give without expectation it comes back to you.
11. Finally, GROW UP. Children do what feels good. Adults make a plan and follow it. Self discipline means doing what you need to, when you need to do it, regardless of how you feel about it. Or simply, grow up.
Practice these steps and you will become financially healthy!