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Financial Freedom
The bad news is there is no quick road to financial freedom beyond the lottery or Uncle Moneybags leaving a trust fund for you. Let’s call these scenarios unlikely. The good news is that financial freedom can be had by anyone with an income. It takes work and discipline but you can do it, even if you are caught in credit crunch and accounts are being sent to collection agencies. You can make changes that will let you achieve the goals you want to.
First thing to do is make a budget. Make it a realistic one. If you stop for McDonalds or Starbucks three times a week, include in the budget. Really pay attention to where your money goes. You’ll be surprised how many places you can cut expenses and turn that money into savings. The biggest expense that serves you no purpose whatsoever is credit card interest and fees.
Get out of debt ,Consolidate if you have to, but set yourself in a position where you are making progress on those cards and then, this will be tough, get rid of most of them. Rarely is there a good reason to have more than four cards. You’ll just use them and while buying things with credit is easy and exciting (it actually releases endorphins) paying for it is a lot tougher. Break your credit habit!
Next, make some goals for yourself and realistic dates that they will be met by. Going to need a new car? Set a savings plan for the down payment and a target date to start shopping. Want to travel to South America? Build that into your budget and set a target date. Are you ready to consider home ownership? It is one of the best ways to turn your housing expense into an asset and it is a great tax saving vehicle, so start saving the down payment. Investigate mortgages you can reasonably afford and make a target date to reach that goal. Once you get a few of these under your belt you will see how the sacrifice of budget cutting can payoff when you buy things you really want.
Still not convinced that a savings plan can work for you? How would you like to be on the other end of interest payments? Instead of paying out 9 to 19% on your credit cards, you could have even the most basic of mutual fund investments paying a return of 4-7% on your investment and that’s without much oversight or knowhow. Using the one magic bullet that consumers still have- compound interest- you can position yourself for a secure future. What’s more freeing than that?
Other considerations should be banking up at least enough of an emergency fund to cover three months of expenses (six to nine is preferable). Also, if you have children and are the main source of income for your household you need term life insurance. Choose an amount that would pay off the mortgage, living expenses and college for the kids. You’ll be surprised how cheap term life is of you are in reasonably decent physical shape.
The last thing to remember is to be diligent and committed to your plan. Constantly revise and update your budget. Use a balance sheet every so often to monitor your net worth (it will be increasing if you’ve stuck to your plan) and an income and expense worksheet to monitor your actual cash flow. This will help in updating your budget. At the core of all this is spending less than what we have coming in. If you can make this as natural and controlled as breathing, financial freedom will be attainable. And you have to buy one lottery ticket.
Topics: Credit Repair |
